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European leaders arrive Thursday for a European Union summit in Brussels. From left, French President Nicolas Sarkozy, Spanish Prime Minister Jose Luis Zapatero, Greek Prime Minister George Papandreou and German Chancellor Angela Merkel.GEORGES GOBET

Europe's leaders will spend Friday trying to hammer out details of a bailout of Greece after France and Germany reached an 11th-hour compromise last night that enables emergency funding for bankrupt economies.

The deal comes at the cost of a self-contained European solution, sought by continental leaders. The 16 countries that use the euro as their currency came to the brink of a complete political breakdown at an emergency summit Thursday after German Chancellor Angela Merkel, head of the continent's strongest economy, refused to back any sort of European Union bailout for Greece, which faces unaffordable debts that will come due in the next eight weeks.

Late last night, French President Nicolas Sarkozy gave in to Ms. Merkel's demand that the International Monetary Fund be brought in to finance a major share of Greece's rescue -- an intensely unpopular move among European Union leaders, who believe the continent should settle all its problems internally.

The 16 euro zone countries have agreed to the basic terms of the bailout deal but it needs the backing of 27 EU member states, which will likely require difficult talks Friday. But for Germany to agree to a bailout, and for France to agree to IMF participation, marks a breakthrough in a deadlock that had threatened he integrity of the European political and economic community.

As it is, the proposed pact would cost EU members - almost all of them facing onerous debts already - a reported €22-billion ($30-billion), divided among member states according to the size of their economies. Those funds would take the form of low-interest loans to Greece.

But the proposed scheme would require the unanimous assent of all 16 euro zone countries, giving any member an effective veto over a bailout.

The IMF would provide about a third of the bailout loans, and its experts would oversee the bailout and impose conditions for acceptance, which typically involve strict spending cuts and pay freezes.

The IMF, which was designed to manage such bailouts and has hundreds of billions in international reserves to manage such operations, would seem to be ideal for the task, and many economists have said that an independent IMF bailout would be preferable because it would avoid entangling other euro zone countries in Greece's troubles.

But the Franco-German proposal, which diplomats said last night would involve the IMF financing only a third of the Greek bailout, will involve lengthy negotiations Friday because it is intensely unpopular among EU leaders, who see any use of outside help as a failure of the 27-nation federation.

"We need fundamentally a European solution, via loans at reasonable rates - there is no reason we should bring in the IMF," said Spanish Prime Minister Jose Luis Zapatero, who holds the rotating European Council presidency. "The solution needs to start, and to be fundamentally, a European one."

Equally ardent opposition came from Jean-Claude Trichet, head of the European Central Bank, who denounced the proposal last night as a betrayal of European values.

"If the International Monetary Fund or any other body takes action instead of the euro group, instead of the governments … this is obviously very, very bad," Mr. Trichet told reporters.

"Euro zone governments must not abandon an inch of their current responsibilities."

But it is extremely rare for any euro zone decisions to fail if they have the support of both France and Germany. Britain was not actively involved in the bailout because it is not in the euro zone, though Prime Minister Gordon Brown took part in the summit, organized by the European Council.

Much of the discord comes down to domestic politics, which have stood in the way of the sort of united solution envisaged when the euro replaced the currencies of 16 countries a decade ago.

Ms. Merkel, who faces difficult regional elections soon, could not be seen to pledge public funds of Germany to support the Greek debt - a move that is unpopular with the German public.

As the world's second-largest exporter after China, Germany has a large balance-of-payments surplus with Greece and is deeply intertwined with the troubled country's economy.

Mr. Sarkozy faced a trickier political problem: The head of the IMF, Dominique Strauss-Khan, is a star within the opposition Socialist Party and is a likely rival to the president in a future election. So a victory for the IMF, despite being a French-led body that receives funds from every major European country, would not feel like a success for Mr. Sarkozy.

In their compromise agreement Thursday, both leaders agreed to a considerable political loss of face.

But it did provide Europe an opportunity to take action itself. Geek Prime Minister George Papandreou said last week that he would go to the IMF unilaterally if no help were forthcoming - an option that European leaders considered unacceptable - although he also said that his own austerity programs, launched last month, may prove to be enough to sidestep a bailout.

The possible deal appeared to save Greece from a potential credit-rating downgrade that could have made Greek bonds ineligible for use as collateral with the ECB - a potential crisis for countries, including Greece and France, that hold those bonds.

Greek bonds rose on international markets Thursday after news of the compromise broke, narrowing the interest rate spread somewhat between Greek and benchmark German bonds.