Greek debt will be slashed by €100bn as a result of new plans agreed at a crucial EU summit in Brussels last night.

But European bank chiefs were locked in disagreements with EU leaders over the scale of the losses and how they would be covered.

Banks that lent money to Greece will have to pick up the tab, but taxpayers across Europe may have to cover the losses, as happened in the Republic Ireland.

Last night's proposal will leave the door open for demands that Ireland get a cut in its €160bn debt mountain.

Irish Prime Minister Enda Kenny said the Republic would use the new arrangements to try to reduce the costs of the national debt.

"We will continue to seek improvements in relation to the legacy costs that have been incurred by the State in rescuing the banking system."

He added that a plan to expand the eurozone's main rescue fund to more than €1 trillion "may also offer further opportunities from which we can benefit".

But Mr Kenny firmly ruled out Ireland following in the footsteps of Greece and seeking a cut in its national debt.

"What is being done for Greece -- including the steps that will need to be taken to make its debt sustainable -- reflect a uniquely difficult situation," he said.

"I cannot say it often enough or strongly enough; we will not be going down the same road," Mr Kenny added.

However, Greece's deal will alter Europe's economic landscape and lead to huge market uncertainty. EU leaders are desperate to convince the markets that no other country will follow the Greek example.

Mr Kenny must first convince the world that Ireland will honour its debts. Once he has done this he can seek to have our debts lowered.

"We don't want to see the hard-won progress we have made undermined by events beyond our control," he said yesterday.

He said Ireland was positioning itself as the eurozone's recovery story and was anxious to ensure higher private sector losses on Greek debt do not spook sentiment toward Irish bonds.

"We remain vulnerable to negative developments and ... there is a shared interest in ensuring that we are adequately protected."

Last night the euro leaders also agreed to increase the capacity of the EU's main rescue fund, known as the EFSF, to more than €1 trillion.

The details of how they plan to draw a line under Europe's worsening debt crisis will not be nailed until next month.

Finance ministers will be asked to finalise the terms and conditions for how the expanded EFSF will operate in November. In addition, countries like China and Brazil could invest in the euro rescue possibly via co-operation with the IMF.

Europe's banks will also have to cover the Greek losses and increase their financial strength with new capital, some of which may come from taxpayers.

However, it emerged late last night that Irish banks will have to raise almost none of the €106bn in new cash that European leaders ordered the continent's biggest banks to find.

Irish banks need to make a provision for only an additional €25m of recapitalisation funding -- whereas the Greeks need €30bn, the Spanish €26bn, Italian banks €15bn and French €9bn. The German banks do not need recapitalisation. Banks have been told to try and raise the funds through private investment before seeking government help or a bailout.

Finance Minister Michael Noonan said the outcome of the negotiations "reinforces the robust and conservative nature of the stress tests taken by Irish banks last March".

Details of the talks emerged following a highly charged summit, where German Chancellor Angela Merkel warned that failing to resolve the eurozone crisis could jeopardise the single currency and end "half a century" of peace in Europe.

As European leaders struggled to reach a deal over a bail-out package, Ms Merkel said "the world is watching".

"If the euro collapses, then Europe collapses," she added.