France and Germany agree debt deal. France and Germany have agreed on a joint position hours before emergency talks in Brussels, where eurozone leaders have been urged to "do what it takes" to ensure the stability of the single currency.

French president Nicolas Sarkozy and German chancellor Angela Merkel held talks for seven hours in Berlin before today's summit, said Mr Sarkozy's office.

In a statement, his office said the two leaders "reached agreement on a common Franco-German position", without saying what the position was.

Earlier, European Commission president Jose Manuel Barroso urged eurozone leaders to take decisive action. His plea for leaders to "do what it takes" reflects fears that speculators will pounce if the latest in a series of economic summits fails to restore euro credibility and halt "contagion" to other struggling member states, including Ireland, Portugal and Italy.

"Nobody should be under any illusion: the situation is very serious. It requires a response - otherwise the negative consequences will be felt in all corners of Europe and beyond", warned Mr Barroso.

The latest summit had been demanded by France but opposed by Germany and other countries, concerned that more inconclusive talks would only worsen the market response.

Mrs Merkel had said she would only attend if a positive result was assured. But as the leaders of the eurozone countries prepared to meet, there had been little sign of full agreement on a second bail-out package for Greece - this time to include a financial burden on private bondholders as well as taxpayers in the event of default.

Mr Barroso talked up the single currency, saying: "The euro is one of our greatest assets. Its benefits far outweigh the effort that is required by the member states on the different sides of the negotiation. All of our efforts are based on a strong single market and a strong euro. That is what is at stake. That is why we must provide a solution."

Meanwhile, George Osborne has warned a failure of eurozone leaders to "get a grip" on the sovereign debt crisis could lead to an economic crisis as serious as the recession following 2008's banking crash.

In an interview with the Financial Times, the Chancellor said he is "very worried". He told the newspaper: "We see the potential for a set of economic events that could be as damaging as 2008." But Mr Osborne said he is optimistic eurozone leaders will make progress.