Leaders in the EU have said they plan to increase the powers of the bailout fund 'several fold' in a broad statement released after an emergency meeting in Brussels.
The recapitalisation of Europe's most vulnerable banks is likely to involve boosting their reserves by up to €100bn, raised through private investors or ultimately from the bailout fund. According to some experts up to half as much again will be needed to secure a true recovery.
While short on specifics, the three-page statement said that the eurozone will plan to leverage the €440bn European Financial Stability Facility (EFSF).
Reports suggested that the total size of the EFSF could reach €1tn after leveraging.
The details of the EFSF will be decided after further meetings, which could be held as soon as the weekend.
"Further enhancements to the EFSF and its resources are possible through cooperation with the IMF," the draft statement reads.
Meanwhile Reuters reported that leaders from the eurozone nations were seeking a €100bn cut in private sector Greek debt.
It had been hoped that the summit of the 27 EU leaders would produce a more definite solution to the ongoing sovereign debt crisis. A paragraph on Italy's debt crisis was simply left blank, and the statement will likely fall short of even the meagre expectations of some market analysts, economists and politicians.
However, leaders said that it represented "progress".
Leaving Brussels following the meeting, Prime Minister David Cameron said that "some good progress" had been made.
Cameron added that proposals on recapitalisation on some European banks "wasn't watered down" and "will go ahead" when the rest of the agreement is finalised.
The PM will not attend a working dinner after the emergency meeting to be attended by the heads of the 17 eurozone nations.
In the Commons before leaving for Brussels, Cameron had called "decisive" action on Greece, a "proper recapitalisation" of the banks and a "firewall" to prevent contagion spreading.