Merkel, Sarkozy agree on Greek rescue package

 BERLIN (AFP) -- German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed early Thursday on a "joint position"

concerning a Greek rescue package, a French delegation source said.

This position, reached after hours of discussions, would be submitted to EU president Herman van Rompuy overnight and would be the basis for discussions among eurozone leaders in Brussels on Thursday, the source said.

Sarkozy and Merkel met in Berlin on Wednesday and were joined in the evening by European Central Bank (ECB) chairman Jean-Claude Trichet.

The aim of their discussions was to find a Franco-German position that would be given the go-ahead by the ECB to save debt-ridden Greece and contain the debt crisis that has shaken the eurozone countries.

"Germany and France ... must agree. If this does not happen then we can't make progress in Europe. There is confidence on both sides that such a common line can be worked out this evening (Wednesday)," Merkel's spokesman Steffen Seibert said earlier.

"This is uncharted territory for all those involved. But this is a challenge that we must all overcome," Seibert said, saying the eurozone was facing its "biggest-ever test."

He added that although France and Germany were the two biggest economies in the 17-nation eurozone, Merkel and Sarkozy were also in close contact with other leaders as well as with EU President Van Rompuy.

Finance ministry spokesman Martin Kotthaus told the same briefing that he still expected the new bailout to include private sector involvement, without saying what form this would take.

"We will of course reach a solution that we, and hopefully you too, will be happy with," Kotthaus said.

Merkel, wary of unhappy voters and a watchful constitutional court and parliament, has pressed for private investors, not just taxpayers, to pay for some of what will be the eurozone's fourth rescue package.

But Germany, the eurozone's paymaster, backed by Finland and the Netherlands, has been at odds with the European Central Bank and other eurozone governments over how this would work.

Credit rating agencies have warned that any change to the terms and conditions of outstanding Greek sovereign debt would lead them to classify Athens as being in default, something which could have dramatic results.

Trichet repeated a warning on Monday that any default would mean that Greek banks could no longer offer the country's bonds as collateral for vital cash lifelines from the ECB.