Merkel says confidence now key for Greece

THE HAGUE (Reuters) - German Chancellor Angela Merkel said Thursday the first priority for Greece is to win back the confidence of financial markets and that the debt-stricken country's first steps had a positive impact.

"Confidence of the markets and in the euro can only be regained when Greece itself makes (Greece) work," Merkel told reporters in The Hague after two hours of talks with Dutch Prime Minister Jan Peter Balkenende.

Balkenende added that European powers must consider the help of the International Monetary Fund as an option for Greece. European leaders have in recent days debated the idea of a parallel European Monetary Fund as one option to deal with a euro zone crisis.

Merkel did not directly address the EMF debate but said that stability sanctions in the European Monetary Union pact were not yet sufficient in their impact.

"We both agree that the growth and stability pact's sanctions are not yet sufficient. We have to consider -- and this is most important -- how we can make the pact valid for everyone," Merkel said.

(Reporting by Gilbert Kreijger, writing by Ben Berkowitz; editing by Janet McBride)