EU leaders look set to agree on a growth package for the struggling eurozone but Italy and Spain want quick action to lower their borrowing costs.
Germany's Chancellor Angela Merkel is under pressure to accept some pooling of eurozone debt - a move that could help reassure sceptical lenders.
But she says that could only happen if Brussels had more control over budgets. Plans for a more integrated eurozone, including a banking union, are being discussed at the Brussels summit.
BBC Europe editor Gavin Hewitt says Francois Hollande's election as French president last month has changed the dynamic, and there are now deeper political divisions between France and Germany.
Mr Hollande made a new plea for EU solidarity as the summit opened, whereas Mrs Merkel emphasised the need for budget responsibility and boosting competitiveness.
"I'm here to try to find rapid solutions for those countries facing pressure from the market, despite having made huge efforts to balance their budgets," the socialist French president said.
Mrs Merkel said progress had been made on a pact for growth and hoped the leaders would adopt a 130bn-euro (£104bn; $162bn) stimulus package. This includes a 10bn-euro boost of capital for the European Investment Bank.
UK cautious
On arrival at the summit, UK Prime Minister David Cameron said: "These are hard decisions for the eurozone countries to make and we should be encouraging them to go ahead."
But when asked about plans for transferring more budgetary powers to the EU level, he said "I... in many ways share people's concerns about Brussels getting too much power."
European authorities have unveiled proposals such as the creation of a European treasury, which would have powers over national budgets.
The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems. Spanish 10-year government bonds were trading at yields above 6.9% on Thursday morning, coming close to the 7% considered unaffordable.
Spain's Prime Minister Mariano Rajoy said debt sustainability was a pressing problem. "We are paying rates that are too high to finance ourselves and there are many Spanish public institutions that cannot finance themselves."
Spanish and Italian leaders are worried that their countries could soon - in effect - be shut out of international markets and forced to seek assistance.
The debate about short-term fixes could become very bitter indeed, the BBC's Chris Morris reports.
'Vicious circle'
Mrs Merkel has warned there is no "magic formula" to solve the crisis.Several EU leaders want individual countries' debts guaranteed by the whole eurozone, for instance in the form of centrally issued eurobonds.
But Mrs Merkel told the German parliament on Wednesday that eurobonds were "the wrong way" and "counter-productive", adding: "We are working to breach the vicious circle of piling up debt and breaking [EU] rules."
She said to loud applause: "Joint liability can only happen when sufficient controls are in place." Stronger competitiveness was the condition for sustained growth, the chancellor said. Mr Hollande believes eurobonds should be a eurozone priority for helping countries like Italy and Spain bring their borrowing costs down.
But Mrs Merkel continues to insist that before anything is done to increase the burden on German taxpayers, building blocks towards greater fiscal, banking and, eventually, political union must be put in place.
bbc.co.uk
Germany's Chancellor Angela Merkel is under pressure to accept some pooling of eurozone debt - a move that could help reassure sceptical lenders.
But she says that could only happen if Brussels had more control over budgets. Plans for a more integrated eurozone, including a banking union, are being discussed at the Brussels summit.
BBC Europe editor Gavin Hewitt says Francois Hollande's election as French president last month has changed the dynamic, and there are now deeper political divisions between France and Germany.
Mr Hollande made a new plea for EU solidarity as the summit opened, whereas Mrs Merkel emphasised the need for budget responsibility and boosting competitiveness.
"I'm here to try to find rapid solutions for those countries facing pressure from the market, despite having made huge efforts to balance their budgets," the socialist French president said.
Mrs Merkel said progress had been made on a pact for growth and hoped the leaders would adopt a 130bn-euro (£104bn; $162bn) stimulus package. This includes a 10bn-euro boost of capital for the European Investment Bank.
UK cautious
On arrival at the summit, UK Prime Minister David Cameron said: "These are hard decisions for the eurozone countries to make and we should be encouraging them to go ahead."
But when asked about plans for transferring more budgetary powers to the EU level, he said "I... in many ways share people's concerns about Brussels getting too much power."
European authorities have unveiled proposals such as the creation of a European treasury, which would have powers over national budgets.
The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems. Spanish 10-year government bonds were trading at yields above 6.9% on Thursday morning, coming close to the 7% considered unaffordable.
Spain's Prime Minister Mariano Rajoy said debt sustainability was a pressing problem. "We are paying rates that are too high to finance ourselves and there are many Spanish public institutions that cannot finance themselves."
Spanish and Italian leaders are worried that their countries could soon - in effect - be shut out of international markets and forced to seek assistance.
The debate about short-term fixes could become very bitter indeed, the BBC's Chris Morris reports.
'Vicious circle'
Mrs Merkel has warned there is no "magic formula" to solve the crisis.Several EU leaders want individual countries' debts guaranteed by the whole eurozone, for instance in the form of centrally issued eurobonds.
But Mrs Merkel told the German parliament on Wednesday that eurobonds were "the wrong way" and "counter-productive", adding: "We are working to breach the vicious circle of piling up debt and breaking [EU] rules."
She said to loud applause: "Joint liability can only happen when sufficient controls are in place." Stronger competitiveness was the condition for sustained growth, the chancellor said. Mr Hollande believes eurobonds should be a eurozone priority for helping countries like Italy and Spain bring their borrowing costs down.
But Mrs Merkel continues to insist that before anything is done to increase the burden on German taxpayers, building blocks towards greater fiscal, banking and, eventually, political union must be put in place.
bbc.co.uk
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