MercoPress. South Atlantic News Agency

The Guardian reports Germany and France agreed on 2 trillion Euros rescued fund

However Angela Merkel said an only summit would not be enough

The Guardian newspaper reported on Tuesday that France and Germany had agreed to boost a euro zone financial rescue fund to two trillion Euros pushing US stocks and the Euro higher despite doubts about whether there was such an agreement.

Earlier, German Chancellor Angela Merkel warned that leaders would not solve the debt crisis at one summit meeting.

The Guardian, citing senior European Union diplomats, said the Euro zone would endorse a five-fold increase in the 440-billion-Euro bailout fund, giving it some two trillion Euros to help troubled governments and banks survive should Greece or any other troubled Euro zone country default.

The paper said confidence that the plan would be approved at Sunday's crisis summit was on the rise after Moody's warned it might put France's top AAA credit rating on review, citing the cost of bailing out troubled banks or other members of the euro zone.

Markets have been on edge for fear European leaders would not agree on a plan to address the crisis, which has already forced Greece, Ireland and Portugal to seek bailouts and has driven up borrowing costs in Italy and Spain.

According to the Guardian report, France and Germany agreed that Europe's banks should be recapitalized to meet the 9% ratio the European Bank Authority is demanding after having examined the exposure levels of between 60 and 70 “systemic” banks.

While French and German banks are said capable of meeting the new capital ratio on their own, other countries' banks may need help from the state or the expanded bailout fund, known as the European Financial Stability Fund, the paper reported.

Berlin and Paris are also said to be closer to agreement on increasing private sector involvement in a second 109-billion-Euro rescue for Greece. The voluntary “haircut” for bond holders was set at 21% in July but worsening financial conditions have spurred Germany to push for private creditor losses of up to 50%.