European shares fall ahead of eurozone summit

London's FTSE 100 index of top shares dropped 0.87 percent to 5,803.11 points in late morning deals. Frankfurt's DAX 30 declined 0.90 percent to 7,156.17 points and in Paris the CAC 40 index shed 0.96 percent to 3,718.41.

The Stoxx 50 index of leading eurozone companies decreased by 0.66 percent to 2,688.00 points.

In foreign exchange trading, the euro slid to US$1.4147 from US$1.4212 late in New York yesterday.

Eurozone leaders entered a critical summit in Brussels eyeing a deal to reduce Greece's debt mountain, but without excluding a default to save the euro from its worst crisis.

A draft agreement was put on the table for the 17 leaders following an 11th hour deal reached between the eurozone's two powerbrokers, German Chancellor Angela Merkel and French President Nicolas Sarkozy, a European diplomat said.

The leaders dropped the idea of a special tax on banks to help fund a second Greek bailout, the European diplomat said. The draft opens the door to German calls for private sector involvement in the bailout, even at the risk of triggering a default.

Traders were also closely watching developments in Washington, where US President Barack Obama was set to meet with opposition Republican leaders to seek a compromise solution to the debt-ceiling battle.

The White House has warned that failure to raise the debt limit by August 2 could lead to a US government default, which Obama has characterised as economic "Armageddon".