U.S. President Barack Obama pledged at a Group of Eight summit on Saturday to work with Europe to balance growth with debt reduction as world leaders try to prevent the worsening euro zone crisis from destabilizing the global economy.
European Union leaders seemed keen to stress on Friday that they would stand firm in protecting their banks, after news of escalating bad loans raised the specter that rescuing Spain's banks would crash the euro zone's fourth largest economy.
"We will do whatever is needed to guarantee the financial stability of the euro zone," EU President Herman Van Rompuy said.
Earlier French President Francois Hollande suggested using European funds to inject capital into Spain's banks, which would mark a significant acceleration of EU rescue efforts.
An Italian newspaper reported that Italian Prime Minister Mario Monti has propose at the G8 creating a European-wide system of bank deposit insurance.
There is growing agreement among G8 leaders that the answer to the eurozone crisis if for members of the single currency to mutualise their debts, meaning strong members like Germany partly guarantee the debts of weaker ones like Greece.
Mr Cameron and Francois Hollande of France agreed on Friday night about the need for some sort of debt mutualisation in the eurozone.
That could mean the issuing of eurobonds, loans guaranteed by all 17 eurozone governments.
Mrs Merkel has resisted any such plans, reluctant to ask German taxpayers to underwrite the budgets of indebted southern Europeans.
But as G8 leaders put more emphasis on the need for growth than on the need for austerity to balance budgets, the chancellor risks being isolated in Camp David.
The summit is not expected to announce any new action on the economy, but a communiqué to be approved tonight will stress the "imperative to create growth and jobs" .
The leaders will also discuss a US call for developed economies to release oil from their strategic reserves to try to bring down world oil prices.
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