Desperate eurozone chiefs look to IMF

The latter option could see the European Central Bank channelling loans to the IMF and then on to embattled eurozone states. The ECB and Germany have stubbornly resisted the idea of the Frankfurt institution to lend directly to governments, but with strong IMF conditionality attached to such cash, ministers are hoping the fudge will be sufficient to win over opponents.

"We also agreed to rapidly explore an increase of the resources of the IMF through bilateral loans, following the mandate from the G20 Cannes summit, so that the IMF could adequately match the new firepower of the EFSF and co-operate even more closely," eurogroup chairman Jean-Claude Juncker told reporters after the meeting.

The desperate turn to the international lender comes as efforts to achieve a boost in the fund’s firepower to the hoped-for €1 trillion failed.

The ministers Tuesday night agreed on a plan for the EFSF to guarantee the first 20-30 percent of bonds issued by troubled eurozone states and the creation of ‘co-investment funds’ that the governments had hoped would be attractive enough to the likes of Asian sovereign wealth funds to increase the rescue fund’s leverage. But China and other lenders have failed to express much interest.

The most that could be anticipated would be €625 billion. EFSF chief Klaus Regling said there were not expectations that investors with significant sums would materialise in the coming days or weeks.

"We have talked about leverage though private money, but it would be two or two and a half times an increase so not sufficient and we have to look for other solutions to complement the EFSF and that in my mind will be the IMF," Juncker said.

The bid comes as the IMF's contributors themselves have yet to agree on a boost to its coffers.

European economic affairs commissioner Olli Rehn said that discussions were proceeding with the Washington-based lender on ways to expand the IMF's lending capacity.

"We are together with the IMF consulting potential contributors through bilateral loans," he said.

The lurch toward Washington came as the yields on Italian three-year bonds surged to 7.89 percent and to 7.56 percent on 10-year offerings, well above the cost that forced Greece, Ireland and Portugal to turn to the EU and IMF for help.

Separately, Rehn said that the new technocratic Italian government would have to ramp up its austerity measures, going further than those already announced.

Meanwhile, the ministers also finally signed off on an €8 billion lump of cash for Greece, the sixth such tranche of its €110 bail-out, a move that brings at least some relief to the eurozone periphery.