Berlin and Paris make new euro rescue bid

In the statement Thursday from Sarkozy's office, Paris and Berlin also called for "immediate negotiations" with the private sector "to find an agreement allowing to strengthen the sustainability" of Greek debt.

According to the statement, the two leaders spoke by telephone on Thursday and showed their "complete agreement to put forward a global and ambitious answer" to the eurozone debt crisis.

This will include "the operational implementation of new intervention methods of the EFSF (European Financial Stability Facility), a plan to reinforce the capital of European banks, the establishment of economic governance of the eurozone and the reinforcement of economic integration."

EU leaders are meeting on Sunday and Wednesday in a bid to thrash out a solution to a debt and banking crisis in the eurozone that has threatened to tip Europe - and the rest of the world - into recession.

Officials are engaged in fevered diplomacy before the make-or-break summit.

Eurozone finances meet on Friday and EU finance ministers and foreign ministers on Saturday to prepare the meeting.

Germany and France "have agreed that all of the elements of this global and ambitious answer will be profoundly examined during the (EU) summit on Sunday so they can be definitively adopted by the heads of state and government during a second meeting on Wednesday at the latest," the statement said.

It also called on Greece to "make ambitious commitments to rectify the situation in their economy in the framework of a new programme."

Steffen Seibert, spokesman for Chancellor Angela Merkel, told reporters in Berlin: "We have made enormous progress but not enough to take final decisions on Friday.

"In certain areas, we have reached agreement, in others, we are on the right track ... Europe needs answers that are carefully considered and serious," he said. "We will have talks on Sunday and we will take decisions on Wednesday," he added.

German Finance Minister Wolfgang Schäuble said earlier on Thursday there was "complete agreement" between Paris and Berlin on the EU's bailout fund but that no accord had yet been clinched at a European level.

"France and Germany have a completely agreed position on these questions, but we know ... that this is not a European solution," Schäuble told reporters.

"France and Germany have a responsibility to lead in Europe but that does not replace discussions that are being carried out by all 17 member states" that share the euro, he added.

A mini-summit in Frankfurt on Wednesday that involved French President Nicolas Sarkozy, German Chancellor Angela Merkel and senior EU officials failed to yield a breakthrough, prompting reports of deep divisions.

Schäuble reiterated that Germany would not be prepared to raise its contribution to the €440-billion ($607-billion) European Financial Stability Facility (EFSF), which currently stands at €211 billion of state guarantees. However, officials were looking at ways to deploy the fund "more efficiently" he said.

Asked if this would involve leveraging the fund, he said: "I don't know. At the moment, we don't have a common (European) proposal. We're working on it.

"The working group of deputy finance ministers - the so-called European Working Group - is meeting ... we are in constant contact. There are intensive negotiations," he said.

There has been intense speculation that EU leaders will seek to boost the firepower of the fund to as much as €2 trillion by insuring investors against future losses from their sovereign debt holdings.

Earlier Thursday, Schäuble's office admitted that differences remained between European countries over the role of the eurozone bailout fund in addressing the debt crisis, in a document obtained by news agency AFP.

"There remains the need for agreement on the guidelines for primary market and secondary market intervention" to buy sovereign bonds of debt-mired countries, the ministry said in a letter to members of the lower house of parliament's budgetary committee.

AFP/mry