European banks may need more than 100 billion euros ($135 billion) to withstand the sovereign debt crisis, said Ireland ahead of a key meeting of Europena leaders.

German Chancellor Angela Merkel and French President Nicolas Sarkozy will hold a crucial meeting on Sunday to work out how to recapitalise the lenders.

The falling value of banks' holdings of government debt from Greece and other euro zone periphery states has already prompted the implosion of Belgian lender Dexia, adding urgency to the Merkel-Sarkozy talks on the crisis.

Germany and France have so far been split over how to strengthen shaky lenders and fight financial market contagion that may follow a possible Greek default.

Paris is keen to tap the euro zone's 400 billion euros rescue fund, the European Financial Stability Facility (EFSF), to recapitalise its own banks, while Berlin is insisting the fund should be used as a last resort.

The International Monetary Fund (IMF) has said European banks need 200 billion euros in additional funds.

Irish Finance Minister Michael Noonan said the capital needed to bolster banks cushions was likely to come from a variety of sources but the bill would be large.

'I think there is general agreement that it will be significantly in excess of 100 billion (euros),' Noonan said on the sidelines of an economic forum in Dublin.

'I know that some of the big German banks that I was talking to personally intend raising money on the market so it will be private funding. Other banks would like to avail of the EFSF fund. Other banks will rely on their sovereign governments to provide the capital so there is going to be a range of ways of doing it,' he said.

Sarkozy is due to arrive in Berlin today afternoon and hold a working dinner with Merkel in the evening, amid signs that conditions for resolving the crisis are getting no easier.-Reuters