Gonzi heads for eurozone emergency summit

The 17 leaders of the eurozone countries – including Malta’s Prime Minister Lawrence Gonzi -  have been urged to "do what it takes" to salvage the single currency after a torrid few weeks on the markets.

Hours before they were due to meet, France and Germany agreed on a common strategy for tackling the problem, which is thought to involve the participation of the banking sector.

The president of the European Commission has warned all eurozone leaders they must find a way forward.

EC president Jose Manuel Barroso says leaders should not be under any "illusion" and warned a failed response will have "negative consequences which will be felt in all corners of Europe and beyond".

The warnings of a doomsday scenario are creating a great deal of expectation that a solution for the debt crisis may finally be in reach.

But German chancellor Angela Merkel, leader of the Europe's largest economy, has warned that people should not expect miracles.

"If you want to act responsibly you know that such a spectacular step will not happen, including on Thursday," she said.

Merkel met French president Nicholas Sarkozy in Berlin last night ahead of the summit.

Eurozone leaders need to find a solution to Greece's troubles, which includes how a second bailout will be arranged and, more importantly, who will pay for it.

There has been resistance to a taxpayer-only loan in Germany, the Netherlands and Finland, where leaders argue that investors should also shoulder the burden.

It is a position which has spooked the markets as no one really knows how big the hit will be and whether it sets a precedent for other European countries facing economic trouble.

Markets around the world are now demanding firm action, but it is not clear if Europe's leaders are capable of achieving that.

The crisis has taken on a frightening new dimension over the last few days as the economic contagion has spread from the periphery to core economies like Italy.

The cost of borrowing has risen above 6% and Italy has enormous levels of sovereign debt - with 7% and beyond seemingly the unwelcome magic number at which the cost of borrowing becomes unsustainable.

Leaders will therefore be working towards a communique that at least gives a sign they have an answer to the growing financial turmoil.

If they fail, many analysts say the crisis will simply worsen and the euro could eventually break up.