France and Germany, the European Union’s key powers, insisted Monday that private creditors must take losses to help over-indebted Greece right its finances, but they also warned the Greek government that E.U. rescue funds will be held back unless it makes a deal soon with the increasingly nervous banks holding its debt.

The stern warning, after a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel in Berlin, underlined the high stakes in faltering talks between the Greek leader, Prime Minister Lucas Papademos, and a coterie of banks and other financial institutions holding billions of dollars in Greek debt that the government acknowledges it cannot pay in whole.

Failure to reach a debt swap deal for Greece would most likely undo the rescue package concocted by E.U. governments late last year and dramatically undermine international confidence in the euro, the currency used by 17 of the 27 E.U. nations. If Greece or others among the 17 euro nations start to peel away, analysts have warned, the world economy could suffer a relapse and the entire E.U. project could be brought into doubt.

“We must see progress on the voluntary restructuring of Greek debt,” the Reuters news agency quoted Merkel as telling a joint news conference after the Berlin consultations. “The second Greek aid package . . . must be in place quickly. Otherwise, it will not be possible to pay out the next tranche [of the bailout] for Greece.”

Merkel said a deal with banks on writing down Greek debts was a “necessary but not sufficient” condition for Greece to benefit fully from an E.U. and International Monetary Fund rescue package and regain financial health. The country must also enact further reforms, she added, disregarding increasing demonstrations of fury from a Greek population called on to accept severe cutbacks in social programs and pay envelopes.

In what was seen as a sign of doubts about the future among investors, Germany for the first time sold almost $5 billion of six-month treasury bonds at a negative yield, news agencies reported. The unusual bond purchases indicated that financial institutions had resorted to asking the dependable German government to hold on to their money, even if it meant taking a loss.

By contrast, Italian issues were bringing above 7 percent and Spanish bonds were at 5.6 percent. Both nations have run up so much debt that their ability to repay what they owe has come into question during the past months of a building debt crisis across Western Europe.

Despite the uncertainities, Hong Kong stocks rose for a second day Tuesday as European leaders stepped up efforts to tackle the debt crisis, and on speculation that China’s government will loosen monetary policy. The Hang Seng Index climbed 0.3 percent to 18,917.87 as of 10:01 a.m. Hong Kong time, set for its highest close since Dec. 8, with three stocks rising for each that fell.

Over opposition from the ECB’s former president, Jean-Claude Trichet, E.U. leaders agreed last summer that lenders to Greece would have to take losses as part of the E.U. and IMF rescue plan. The accord described the losses as “voluntary,” but that was seen as a cosmetic for bond swaps that the banks were not prepared to grant unless forced to do so.