In Reversal, Germany Now Wants IMF Involved in Greece Aid Plan

The euro weakened 1.3 cents to $1.3607 on the German news in Thursday afternoon trading.

Previously, European Central Bank President Jean-Claude Trichet had ruled out an IMF option.

Monetary/Economic Analysis: Prior to Thursday, there was hope that the Greece crisis would bypass the 'rhetoric for dollars' (in this case, actually rhetoric for euros) stage. And with the earlier-announced E.U. framework, it appeared the posturing stage had been averted.

Again, investors should have known better. Chancellor Merkel, feeling heat from domestic constituencies who are concerned the Greek solution may fall disproportionately on Germany, suddenly has a financial affairs spokesman state that the IMF must be part of the deal all along. Thus begins the belated 'rhetoric for dollars' stage.

The calculation here is that, should Germany fail to agree with corresponding E.U. members on a suitable stabilization package (most likely loan guarantees) the ECB will step in, pre-empting any IMF involvement. Among other charges, the IMF's role is to stabilize national financial systems that have no other financial recourse, not nations that belong to unions with a $15.2 trillion economy.