Germany lowered expectations on Monday of a breakthrough in the euro-zone's sovereign debt crisis, saying a weekend summit of E.U. leaders would not produce a definitive solution, in comments that pushed down the euro and European stocks.
Financial markets have risen in the last week on hopes that the 27 European Union leaders will agree on a comprehensive plan to draw a line under the two-year-old crisis, which is weighing on the world economy.
But German Finance Minister Wolfgang Schaeuble said in Duesseldorf on Monday that while European governments would adopt a five-point platform to address the turmoil, it was wrong to expect miracle cure from the summit.
"We won't have a definitive solution this weekend," he said.
Schaeuble said the plan would have to include a reduction in Greece's debt mountain. He repeated at the weekend that private bondholders would have to accept steeper voluntary write-downs on their Greek holdings than the 21 percent agreed last July.
A lead negotiator for the banks said this could only happen if policymakers addressed the "full range" of sovereign debt issues in Europe. Charles Dallara of the Institute of International Finance (IIF) declined comment on reports that the private sector might have to take a 50% loss.
The euro rose to a new one-month high against the dollar and European shares hit a 10-week peak on optimism about the October 23 summit, before easing on Schaeuble's remarks.
Euro-zone leaders are in a race against time to convince banks to accept "voluntary" writedowns of up to 50% on their Greek debt. They are also trying to agree on a blueprint for recapitalizing financial institutions at risk from the deepening crisis.
