German Chancellor Angela Merkel and French President Nicolas Sarkozy have declared a broad agreement is taking shape, at the EU leaders summit in Brussels, on how to tackle the debt crisis.
All 27 EU leaders have also agreed to examine re-opening EU treaties, in order to ensure improved eurozone economic integration.
At a news conference, President Sarkozy suggested differences over how to expand the EU's bailout fund have narrowed, and he cited Ireland as a country which has come out of the crisis, or is on the way out.
The President of the European Commission, Jose Manuel Barroso, described the negotiations this evening as "a work in progress" that was "progressing well."
The Managing Director of the IMF, Christine Lagarde, said that good progress had been made at the summit which puts leaders in a good position for further talks on Wednesday. However, she said that a lot more work needed to be done.
Progress was already reported on bank recapitalisation and cutting Greek debt.
Italy has become a key area of concern, with Chancellor Merkel saying its very high level of debt and it must be reduced in a credible way.
The President of the EU Council, Herman van Rumpoy added: "We have to reassure investors and reassure other states".
EU leaders have agreed to look at re-opening EU treaties - a decision which means all 27 EU leaders will return to Brussels on Wednesday, rather than just the Eurozone.
The Taoiseach, Enda Kenny, said that he was more hopeful now than he was this morning that agreement would be secured.
Arriving at the summit earlier today, Mr Kenny said the world was watching European leadership.
He said: "I hope today we can have progress towards a comprehensive set of clear decisions and to show a joined up thinking process about how to deal with the eurozone crisis."
