Europe's most powerful woman has scored a victory in a long and bitter battle over the Greek crisis. Angela Merkel resisted enormous pressure from her European allies during a summit on Thursday by refusing to throw Greece a massive cash lifeline.

A large bail-out from Berlin was a hugely unpopular option in Germany, where there has been sharp criticism of Athens for the way it has mismanaged and lied about its economy. The media turned up the heat on Ms Merkel ahead of regional elections, arguing that Germans, who retire at 67, should not have to pay for Greeks, some of whom retire before they reach 60.

It was not surprising then that the woman who has previously been feted as the champion of the European project was forced to take a resolutely domestic stance. During crunch talks on Thursday, the same day that the Euro fell sharply, she insisted that the International Monetary Fund (IMF) should be drafted in to help Greece.

Worst-case scenario
"I suggest that we help Greece out with a combination of bilateral loans and the International Monetary Fund. But only in the worst-case scenario, that is if Greece can't get any more money," she said as she arrived at a summit of EU leaders in Brussels.

But French President Nicholas Sarkozy and Commission President José Manuel Barroso had been firmly against bringing in a non-EU body, seeing it as a humiliation and a sign of weakness for the eurozone. Mr Sarkozy and Ms Merkel locked horns for several hours and finally reached agreement in a private tête-à-tête. The French leader came around to the idea that the IMF should help provide just under half the loans needed to keep Greece afloat, with the rest provided through bilateral loans from eurozone countries. Over supper, other EU leaders were also forced to swallow their objections to the IMF.

No miracles
"Our thinking about the IMF did evolve," admitted EU President Herman van Rompuy. "We had several people from the start who were in favour, others who were not. And in the end, we debated it and we settled on this mixed formula. It's not a miracle. We found a balanced and efficient solution."

But one EU official, shaking his head, said: "she's done it again, she's got her way. Angie always gets her way."

The EU's "mechanism", thought to be worth around 30 billion euros in loans, is, however, only theoretical for now: it will be activated only if Greece issues a call for help.

Mutti talks tough
Knowing she held the key to a deal, Ms Merkel played hard ball until the very last minute, holding firm even as the value of the Euro nose-dived. She had refused to even discuss any kind of deal for Greece during the summit. Her tactics won her the support of several Nordic countries and, to some extent, the Netherlands. But it was a far cry from her usual approach of trying to accommodate everyone - a method that has won her the nickname "Mutti", or Mum, in Berlin. "She's clearly under a lot of domestic pressure," said one Brussels source. "Things with her coalition are not going all that well and she needs to shore up her popularity."

Ms Merkel has also pushed for a task force to be set up that will look at how better to coordinate Eurozone economies to avoid a re-run of the Greece debacle, particularly seeing the likelihood that cash-strapped Portugal could also soon come around with a begging bowl.

"I will make sure that lessons are learned from this. We need to make sure we never have a situation like this again, as this should not have happened in the first place," Merkel said.

Bad times for the EU
But on this point, the Chancellor was less successful - there has only been a vague promise to tighten controls on the eurozone so far. There is no guarantee that other countries, such as Italy and Spain, might not pose a similar problem in future.

The Greek debacle has cast a massive shadow on the EU and has exposed a rift between Ms Merkel and Mr Sarkozy, a partnership often seen as pivotal for the smooth running of the EU. One senior EU official, speaking on condition of anonymity said: "It's been incredibly damaging for the EU as a whole to have had this issue unresolved for so long. The EU is going through a very bad time right now."