French president Nicolas Sarkozy will travel to Berlin on Wednesday for a pre-summit meeting with Angela Merkel, the German chancellor, in an eleventh-hour attempt to strike a deal on a new Greek bailout.
Senior European officials said negotiators were still looking at a wide range of possible options to get private holders of Greek debt to help pay for the estimated €115-billion bailout, including a €30-billion tax on European banks, which has quickly emerged as a popular consensus plan.
François Baroin, the French finance minister, told French radio on Wednesday that there was an increasing convergence of views, however, and said he believed the Sarkozy-Merkel meeting could help seal a deal.
"This meeting at the highest decision-making level should allow us to take a further essential step to establish the conditions for a new [rescue] package for Greece that will make Greece's debt more bearable," Mr. Baroin told France Info radio.
The White House said President Barack Obama had telephoned Ms. Merkel on Tuesday night to discuss the ongoing European debt crisis, but gave few details on what was discussed. Mr. Obama played a key role in convincing Ms. Merkel to agree to the first €110-billion Greek bailout 14 months ago.
The outlines of a deal are expected to be hashed out Wednesday evening at a Brussels meeting of the so-called "euro working group" - senior members of all 17 finance ministries - who will be joined by senior aides to all presidents and prime ministers.
The bank tax proposals have emerged ahead of Thursday's emergency European summit.
The plan, which advocates believe could raise €30-billion ($42.5-billion U.S.) over three years, could help satisfy German and Dutch demands that private holders of Greek bonds contribute to a new €115-billion bailout.
It would also likely avoid a default on Greek debt, which is being fiercely resisted by the European Central Bank.
Both Berlin and The Hague are still insisting that other options for private bondholder participation be included, however, and one senior European official said a "sensible" version of other recent proposals is likely to be adopted.
Officials said those proposals - which include a government-financed bond buy-back program, a German-backed bond swap proposal, and a French plan for bond rollovers - could be included as a "menu" of options available to bondholders, who would make their own evaluation on which to choose.
But Ms. Merkel, gave a clear signal of how diffuse the negotiations remained, saying at a news conference on Tuesday that "further steps will be necessary" after the summit, which would not be "one spectacular event that solves everything".
However, the International Monetary Fund, in its regular assessment of the euro zone's economy, called for quick action, warning that continued uncertainty could damage the global economy. "Decisive further policy actions to contain the crisis are critical not only for the euro area itself, but also from a global perspective," it said.
Banking groups in France, Germany and Britain said they believed the proposal was misguided, arguing banks were being improperly targeted by euro zone policy makers. Critics of the tax plan also said it appeared unworkable, since it would require all euro zone countries to pass new tax legislation and would prove almost impossible to target taxes on specific banks holding Greek bonds.
"It would impose a burden on a sector that is only in small part a creditor of Greece," said Michael Kemmer, managing director of Germany's banking association. "If politicians are thinking of a special tax or levy as a solution to the debt crisis, then it should be levied on all euro zone citizens."
François Pérol, chairman of the French Banking Federation, was similarly dismissive. "It does not seem to me that that is the solution for Greece," Mr. Pérol said at a news conference. The British Bankers Association added: "A bank levy doesn't seem to be an appropriate way to deal with sovereign debt issues."
Still, the new emphasis on the tax proposal was an indication that European leaders were backing away from options that would lead to a selective default of Greek bonds. That prospect has spooked the financial markets, leading to a spike in Italian and Spanish borrowing costs as investors flee out of fear that bonds there will also face defaults in the future.
In a "policy options" paper prepared last Friday after a conference call between European negotiators, the tax plan - along with a voluntary program to get bondholders to reinvest in Greek bonds once their holdings come due - was the only option under consideration that labelled a selective default "not likely".
According to a copy of the options paper obtained by the Financial Times, the two other options under consideration - one which includes debt buy-backs, the other based on the French rollover proposal - would both cause at least a selective default, with the buy-back proposal possibly forcing a more complete default.
A buyback plan would likely be financed by the euro zone's €440-billion bailout fund, a move that has been urged by the ECB and the European Commission. On Tuesday, IMF staff told reporters it also backed using the fund for a bond repurchase plan.
They also supported using the fund, formally known as the European Financial Stability Facility, to recapitalize stricken banks rather than just lend direct to governments.