A decision on saving the euro is one of the most important ever taken by EU leaders
European Union leaders are gathering for an emergency summit in Brussels to try to finalise details of a plan to tackle the eurozone debt crisis.
There are fears that the Greek debt crisis could spread to Italy and Spain.
The BBC's Europe Editor Gavin Hewitt says there are growing doubts the leaders will reach a comprehensive deal at the summit.
Before heading for Brussels, German Chancellor Angela Merkel faces a vote in parliament on increasing the bailout fund's firepower without involving more German taxpayers' money. The measure is expected to pass but the key question is whether Mrs Merkel will need to rely on opposition support.
Additionally, Italy has been asked to provide details of its plans for tackling its huge public debt before the summit begins later on Wednesday.
The ruling coalition led by Prime Minister Silvio Berlusconi is reported to have reached a last-minute limited deal on economic reforms - including the contentious issue of increasing the pension age.
His coalition partner, Northern League leader Umberto Bossi, said late on Tuesday: "In the end we have found a way. Now we will see what the EU says."
There are unconfirmed Italian media reports that the two reached a secret deal for Mr Berlusconi to step down in December or January and for early elections to be held soon after.
A spokeswoman for the Northern League has told the BBC that the reports are not true and the two only discussed pensions.
Sticking points
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There will be no stability for the eurozone without the bailout fund having the resources to do its vital job of demonstrating to the world that there's no possibility of Italy or Spain going bust ”
Among the main points of agreement reportedly reached at the weekend by EU officials are:
- European banks must raise more than 100bn euros (£87bn) in new capital to shield them against possible losses to indebted countries
- The European Financial Stability Facility (EFSF) - the single currency's 440bn-euro bailout fund - will be given more firepower, although it is not as yet clear how this will be achieved
- Lenders to Greece will be asked to agree to much deeper losses than the 21% write-off currently on the table.
Key points of disagreement remain between the main eurozone powers.
France had hoped that the European Central Bank (ECB) would support the EFSF by providing it with loans that could increase the fund's total capacity to 2tn-3tn euros.
But this idea was blocked by Chancellor Merkel.
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It's a self-appointed deadline the eurozone can't afford to miss.
By the early hours of Thursday, we may finally discover how much firepower has been amassed to try to blast away the debt turmoil steadily spreading from Europe's financially wayward periphery to its core.
Few expect the final package reached at Brussels will quite be the "big bazooka" demanded by UK Prime Minister David Cameron.
Yet the nature of the deal that's finally agreed will show whether the partners - and Germany in particular - have the will and capability to hold the currency zone together.
We are about to witness what may go down in history as one of the most significant meetings in EU history.
Of all the myriad issues that need fixing. the financial world expects clear responses on the three crucial issues of beefing up the rescue fund to protect Italy and Spain, reducing Greece's debt mountain and shoring up vulnerable banks that have lent to highly-indebted countries.
Analysis
By the early hours of Thursday, we may finally discover how much firepower has been amassed to try to blast away the debt turmoil steadily spreading from Europe's financially wayward periphery to its core.
Few expect the final package reached at Brussels will quite be the "big bazooka" demanded by UK Prime Minister David Cameron.
Yet the nature of the deal that's finally agreed will show whether the partners - and Germany in particular - have the will and capability to hold the currency zone together.
We are about to witness what may go down in history as one of the most significant meetings in EU history.
Of all the myriad issues that need fixing. the financial world expects clear responses on the three crucial issues of beefing up the rescue fund to protect Italy and Spain, reducing Greece's debt mountain and shoring up vulnerable banks that have lent to highly-indebted countries.
Instead, governments are expected to agree that the EFSF can help out troubled eurozone governments such as Italy and Spain by providing partial guarantees to investors and banks who lend them more money.
The markets may be disappointed in this, our business editor says, and it may only buy a year or so - not enough time for fundamental reform of Europe's debt-ridden economies.
There was also disagreement over the extent of losses that should be imposed on Greece's lenders, with Germany seeking a 50%-60% haircut.
The ECB is said to be against such an increase in potential losses.
And difficulty about such details appear to have been behind a decision to cancel a meeting of EU finance ministers which was to have preceded the leaders' summit.
There are fears that a unilateral default by Greece - such as a debt write-off without lenders' consent - could have unforeseen consequences.
French Prime Minister Francois Fillon said that if Wednesday's summit ended in failure, "this could tip the European continent into unknown territory".
Bailout packages for Greece (twice), Portugal and the Republic of Ireland have already been agreed, but stock markets remain in turmoil.
'Letter of intent'
Chancellor Merkel has told Prime Minister Silvio Berlusconi that Italy's high level of debt "has to be reduced in a credible way in the years ahead".
What is the European Financial Stability Facility?
Despite the reported deal - the so-called "letter of intent" - reached after marathon talks later on Tuesday, Mr Berlusconi's main coalition partner, Northern League leader Umberto Bossi, said he remained pessimistic.
The BBC's David Willey in Rome says there is little ground for optimism that the deal is going to satisfy either Italy's EU partners or international financial markets about the country's ability to repay its long-term debts.
Italy, the third largest economy in the eurozone, needs to issue some 600bn euros in bonds over the next three years to refinance maturing debt.
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BBC
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