World awaits Europe's answer to debt crisis

European leaders faced intense pressure on Wednesday to deliver on a promise to resolve the debt crisis at a summit crucial to the world economy as they battled to protect Italy from collapse. European Union presidents and prime ministers gather for their second summit in three days with markets demanding a watertight deal to defuse fears that the crisis will deteriorate into a global recession. The spotlight was on one leader in particular, Italian Prime Minister Silvio Berlusconi, after his EU peers ordered him to return to Brussels with proof of rapid action to cut his country's debt mountain. Europe's leaders were themselves scrambling to produce a multi-pronged battle-plan to shield the euro once and for all. With the Greek debt colossus still haunting the eurozone, governments struggled to convince banks to accept massive losses -- as much as 50 percent of their bond holdings instead of 21 percent previously agreed. The Greek debt write-off is a central element in a package that includes recapitalising Europe's banks so they can absorb the hit, beefing up a rescue fund against further contagion, and strengthening economic governance. Global partners and competitors, from the United States to Japan and China, are pressing European leaders to finally present a lasting solution. "This agreement will need to be implemented quickly and firmly," said Charles Collyns, a top US Treasury official. French Prime Minister Francois Fillon warned failure "could tip the European continent into unknown territory." In Rome, Berlusconi appeared to have reached an 11th-hour deal with his right-wing coalition partners, the Northern League, on a pensions system reform that he could bring to Brussels as evidence of his good will. Northern League leader Umberto Bossi, whose party has been opposed to pension changes, implied there was an accord, which now faced European scrutiny. "In the end we found a way but now we have to see what Europe will say," Bossi said. Saddled with a 1.9 trillion euro debt mountain, equal to 120 percent of GDP, Italy is paying rates of nearly six percent to borrow on markets, almost triple Germany's. The size of the debt has stoked concern that a 440-billion-euro ($605-billion) war chest -- the European Financial Stability Facility (EFSF) -- would be insufficient to rescue large economies such as Italy and Spain. Leaders are examining ways of beefing up its firepower, but first the German parliament has to back the changes at a vote Wednesday, as required by the country's constitutional court. One option would be to insure investors against potential losses on bonds of troubled countries, a bid to tempt nervous traders into buying the debt of shaky economies. The other option is to create a second fund, possibly linked to the EFSF, to entice the likes of China, as well as private investors the world over, to buy this debt. The idea is to boost the EFSF's firepower to more than one trillion euros without increasing the guarantees provided by eurozone states, but the summit is unlikely to announce a headline figure. In Berlin, German Chancellor Angela Merkel drew a new battleline on the eve of the meeting, insisting that leaders strike out a line in draft conclusions calling on the European Central Bank to keep buying bonds of struggling nations -- a role the EFSF is supposed to take over. British Prime Minister David Cameron is coming into the summit with his own gripe, demanding that the EU's 10 non-euro nations like his be associated with decisions of the 17-nation eurozone. The 27-nation EU will meet first at 1600 GMT to decide a recapitalisation of banks amounting to 108 billion euros. But after that, the 17 eurozone leaders will hold their own summit to finalise their grand deal.