French President Nicolas Sarkozy and German Chancellor Angela Merkel reached an agreement on a second bailout for Greece, German government spokesman Steffen Seibert said on early Thursday.
Details would be released later Thursday, Mr. Seibert said.
The resolution of differences between the eurozone’s largest economies will smooth the way for Thursday’s summit meeting of the currency area’s leaders in Brussels to potentially hammer out a deal in hopes of shoring up the reeling Greek economy, which has unnerved markets about the health of the rest of the eurozone.
The French and German leaders had already been meeting for two hours late Wednesday when European Central Bank President Jean-Claude Trichet unexpectedly arrived and joined the talks, which continued for another two hours until around midnight.
Ms. Merkel has advocated that private lenders be required to take part in the new Greek bailout package. Mr. Sarkozy and Mr. Trichet have argued that private participation must be voluntary to avoid the perception of a partial default on debt.
Greece, which received an EU-IMF bailout of 110 billion euros last year, needs a second loan agreement to meet its payments beyond 2012.
Credit rating agencies have warned that forcing losses on bond-holders — even with their agreement — would lead them to declare a selective default for Greece.
Ms. Merkel and Mr. Sarkozy agreed to the last-minute meeting on Tuesday, ahead of Thursday’s eurozone summit in Brussels — which is aimed at solving Greece’s ongoing debt crisis and restoring market conference.
“Germany and France must agree. If this does not happen, Europe cannot advance,” said Mr. Seibert said earlier.
The midnight agreement following growing rancour between Paris and Berlin.
Pressure had been mounting ahead of Thursday’s summit for concerted action on the Greek problem.
In Brussels, European Commission President Jose Manuel Barroso had urged leaders to put national interests aside and take concrete steps.
“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,” he said. “We cannot be light about this, or else history will judge this generation of leaders harshly.” Three Brussels-based economists said in a paper published Wednesday that the value of outstanding Greek debt must be reduced by at least 165 billion dollars.
The heads of state of the 17—nation eurozone are to attend Thursday’s summit, along with IMF chief Christine Lagarde and Trichet.