EU diplomats say that France and Germany have agreed to boost the rescue fund for the eurozone to €2tn (AU$2.68tn), Britain's Guardian newspaper reports.
The Australian dollar rose after the reports, with optimism sparked on global market and US equities pushed higher on the news of a "comprehensive plan" to resolve the sovereign debt crisis, AAP reported.
France and Germany are seeking a deal that will calm the markets in the lead up to next month's G20 meeting.
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German Chancellor Angela Merkel said earlier on Tuesday that this weekend's EU summit was an important step but that more would be needed to stem the long-term debt crisis threatening the global economy, according to AFP.
The summit in Brussels will aim to overcome the eurozone sovereign debt crisis, she told reporters in Berlin. But "this debt has been accumulated over years and that is why this cannot be resolved during one summit," she said.
"Next Sunday's EU summit will mark an important step. But more steps will then follow as the aim is to overcome a debt crisis of states" that has built up over decades, she told a news conference.
Such a crisis "cannot be ended with just one summit," but will require "hard work over the long term," she said.
On Sunday "we shall take important and adequate decisions which will be followed by other decisions" in the future, she added.
Her spokesman, Steffan Seibert, on Monday warned that the package of measures to be discussed by European leaders in Brussels would not immediately resolve all outstanding problems related to the current euro crisis.
"Dreams that everything will be resolved and dealt with by next Monday cannot be fulfilled," he said.
