Initially expected to be "a routine affair", according to a senior diplomat, the two-day talks from 1500 GMT between the European Union's 28 heads of state and government have been hijacked by the escalating row over covert US surveillance of its allies.
As Germany summoned the US ambassador to Berlin over suspicions Washington spied on Merkel's mobile phone -- a highly unusual step between the allies -- a French diplomatic source said she and Hollande will discuss "how to coordinate their response" on the issue.
It was Obama's second such embarrassing call this week after Hollande too picked up his phone to demand an explanation over reports of US spying on millions of phone calls in France.
Rattled by the latest exposure based on leaks from US intelligence contractor Edward Snowden, the White House has said it is not now listening in on Merkel -- but it also did not reject the possibility her communications may have been intercepted in the past.
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In the wake of Snowden's revelations about the activities of the US National Security Agency, several important allies have complained about US covert surveillance and the White House is struggling to stem the diplomatic damage.
The NSA affair has seen claims of US snooping on foreign leaders in Mexico and Brazil whose President Dilma Rousseff last month cancelled a state visit to Washington over the scandal.
As the row widens, the European Parliament on Wednesday asked for a key EU-US bank data-sharing deal aimed at fighting terrorism to be suspended.
But whether the EU leaders will come up with a common stand is less than certain.