The two leaders want to stabilise the Middle East countries after their revolutions with financial and political support

David Cameron and Barack Obama are to back multibillion-dollar plans at their Downing Street summit to pour greater international financial and political support into Egypt and Tunisia in a bid to stabilise political reform.

The US president has already called on Congress to forgive as much as $1bn in debt owed by Egypt, and to provide loan guarantees for up to $1bn in new borrowing for the nation.

Britain and the US are also backing plans to widen the remit of the European Bank of Reconstruction and Development (EBRD) to offer billions in loans, two decades after the bank was set up to foster market economies in Eastern Europe.

Cameron and Obama will take their initiative on to the G8 Summit in Deauville, France, on Thursday and Friday, where the IMF will set out plans to help north Africa and the EU will offer a revised neighbourhood policy.

The EBRD can lend €2.5bn (£2.2bn) a year in the Mediterranean region on top of the €8.5bn–€9bn planned for eastern Europe without the need for additional capital, the bank has said.

The two men have stressed they will work with any democratic governments in the region, but are concerned by the growing signs of political instability in Egypt.

In what is likely to be a 90-minute meeting ranging across the global economy, Afghanistan, Pakistan, Israel, north Africa and Libya, the two leaders are confident they will cement what is now being billed as the "essential relationship".

The two men will start their talks alone for 30 minutes before the deputy prime minister, Nick Clegg, joins them, followed by other officials.

Cameron and Obama are expecting to discuss the pace of troop withdrawals from Afghanistan, with Cameron sticking to his policy of ensuring all British combat troops are out of Afghanistan by 2015 and with all security handed to the Afghan army and police by the end of 2014.

The prime minister is not planning to make any announcement of extra troop withdrawals this year beyond the expected 400 this summer.

Cameron will want to gauge Obama's resolve to find a political settlement in Afghanistan that puts pressure on the Afghan president, Hamid Karzai, to hold detailed reconciliation talks with the Taliban. Karzai and the Pakistani prime minister, Yousaf Gilani, have upgraded a joint Afghan-Pakistan peace commission, and Cameron and Obama are likely to argue that the killing of Osama bin Laden provides a new context in which those talks can take place.

Karzai argues that the only way to weaken the Taliban is to persuade the Pakistan Inter-Services Intelligence agency to direct the Taliban to hold talks.

The Americans are likely to resist any suggestion that they are not pulling their weight on Libya, and will insist that the pressure is being raised by the imminent deployment of Apache helicopters and the more aggressive bombing raids on Tripoli.

The secretary of state, Hillary Clinton, has already pointed out on this trip that the US continues to fly 25% of all Nato sorties over Libya. "We continue to provide the majority of intelligence, surveillance, and reconnaissance assets," she said.

The US state department announced that Libya's rebel government would open an office in Washington, the latest indication that the US views the rebels as the legitimate representatives of the Libyan people.

The president is also expected to set out his latest proposal for breaking the impasse in Middle East peace talks – a formal endorsement of Israel's pre-1967 borders, adjusted to account for Jewish settlements in the West Bank, as the starting point for talks over a Palestinian state.

Britain is more eager than the US to bow to a Palestinian campaign to win international recognition for a new state.

Following the Downing Street meeting, the president and Cameron will attend an event hosted by Samantha Cameron and Michelle Obama to honour US and British service members and veterans. The two leaders will also stage a joint press conference, and enjoy a brief barbecue in the Downing Street garden. Obama will then make his historic address to members of both houses in Westminster Hall. The White House has described the address as the anchor speech of the European trip.

Obama met Ed Miliband, the Labour leader, in Buckingham Palace for roughly 40 minutes.

Labour sources said the two men discussed shared challenges for progressive politicians on both sides of the Atlantic at a time of tight finances, declining living standards and pressure on the middle classes. The two men apparently agreed that they needed to retain a mood of national mission and optimism.

Obama according to Labour also expressed gratitude for the way in which the Labour government helped avert a global financial meltdown by acting with the US at the G20 summit in London chaired by Gordon Brown.

However, Labour remains nervous that Obama may say something that will be interpreted as backing the Cameron government's deficit reduction programme.