Germany, France reach accord on Greek bailout

Germany and France have reached a common position on a second bailout of Greece in their effort to prevent the country's debt crisis from spreading through Europe, officials said on Thursday.

The accord came after seven hours of talks late into Wednesday night between German Chancellor Angela Merkel and French President Nicolas Sarkozy in Berlin, sources in both governments said.

Details of the common position were not revealed, but the French delegation said it would include a contribution to the Greek bailout by Europe's banking sector. European Central Bank President Jean-Claude Trichet joined Merkel and Sarkozy for part of their talks.

The Franco-German accord will now be presented to a summit in Brussels on Thursday of all 17 leaders of the single currency area to address the Greek crisis, which in the last two weeks has threatened to engulf bigger states such as Italy.

The new bailout would supplement a 110 billion euro (USD 156 billion) rescue plan for Greece launched in May last year. It is expected to include fresh emergency loans to Athens from euro zone governments and the International Monetary Fund, and a contribution by private sector investors.

Worried about the impact on financial markets and wary of angering their own taxpayers, euro zone governments have struggled for several weeks to agree on major aspects of the plan, especially the private sector contribution.

The euro rose moderately against the dollar in response to the Franco-German announcement, but markets may remain nervous until details are revealed. Providing fresh money to Greece and arranging for banks to participate could face legal and technical obstacles.

The head of the European Commission, Jose Manuel Barroso, warned on Wednesday that the global economy would suffer if Europe could not summon the political will to act decisively on Greece.

"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," Barroso told a news conference.