Media playback is unsupported on your device Media caption Merkel: ''It has to be implemented quicker because otherwise we will not be able to pay the first instalment in Greece''

An agreement with Greek bondholders must come soon for Greece to receive a vital second bailout, Germany's Chancellor Angela Merkel says.

"The second Greek aid package, including this [debt] restructuring, must be in place quickly.

"Otherwise it won't be possible to pay out the next tranche for Greece," she told a news conference.

Greece needs a second EU-IMF rescue to avoid a default on its debts and possible exclusion from the eurozone.

The rescue, worth 130bn euros (£107bn), would include a voluntary restructuring of Greek debt - meaning bondholders would have to write off 50% of the Greek bonds' value.

'Very tense' eurozone

Mrs Merkel called Greece "a special case" but insisted that "no country should be excluded from the eurozone".

She was speaking in Berlin at a joint news conference with France's President Nicolas Sarkozy, focused on the eurozone crisis.

Mr Sarkozy called the situation in the eurozone "very tense".

EU leaders are facing multiple pressures on the 17-nation eurozone in the run-up to a summit on 30 January.

Never have smaller nations in the EU had less influence Busy agenda for EU's core couple

Chancellor Merkel insists on tougher penalties for countries that violate eurozone budget rules.

Twenty-six of the EU's 27 members have agreed in principle to a new inter-governmental treaty - a "fiscal compact" - to stabilise the euro. The UK refused to sign.

Referring to the pact, Mr Sarkozy said "we want the negotiations to finish in the coming days, so that the treaty is signed on 1 March".

The compact will include automatic sanctions for budget rule-breakers - sanctions that can only be blocked if a majority of powerful eurozone members object.

A new 500bn-euro EU bailout fund - the European Stability Mechanism (ESM) - is to be launched in July, a year earlier than originally planned.

The existing temporary fund - the 440bn-euro European Financial Stability Facility (EFSF) - is considered too weak to rescue a major eurozone economy such as Italy or Spain.

Mr Sarkozy said he and Mrs Merkel had agreed to ask the European Central Bank to "do all it can to ensure the EFSF works more effectively".

Media playback is unsupported on your device Media caption President Sarkozy says he is fully committed to the idea of a tax on financial transactions

The liquidity of European banks remains a big worry, as economic stagnation takes its toll on lending.

Economic data suggest that the eurozone is heading for recession in 2012. The German economy remains much healthier than the struggling eurozone periphery economies, especially Greece and Italy.

The need to revive growth and create jobs is high on the EU leaders' agenda, although many economists argue that the drive for austerity is stifling growth prospects.

Controversial tax

Mr Sarkozy has suggested France could introduce a financial transaction tax as early as February, while Germany says such a tax must be EU-wide.

Nevertheless, Mrs Merkel praised the French initiative, saying "we've been fighting for years to get a financial transaction tax".

The UK government says it will only consider introducing such a tax if there is global agreement on it.

Mr Sarkozy is anxious for France to keep its cherished AAA credit rating as he campaigns for re-election in April.

He holds the banks largely responsible for the debt crisis and sees the financial transaction tax as a fair measure to ease the burden on taxpayers - a message that may appeal to voters.

Mrs Merkel will meet International Monetary Fund (IMF) chief Christine Lagarde in Berlin on Tuesday, to consider how to proceed with the rescues of debt-laden eurozone economies.

Besides Greece, Italy and Spain are also saddled with huge debts, which will have to be refinanced this year. Their borrowing costs remain unsustainably high.

Hungary - outside the eurozone but dependent on it - has seen its sovereign debt downgraded to junk status. It is seeking an IMF standby loan amid a row over its economic policies and weak investor confidence.