Greek finance minister Evangelos Venizelos said that expectations should be moderated for the outcome of European talks this week, the second official in two days to caution against hopes of a resolution to the crisis.
Greece will "aim for the best for the country and the euro area", Mr Venizelos told president Karolos Papoulias during a meeting in Athens today. All the same, "we shouldn't have great expectations from Sunday's summit", he said.
Mr Venizelos joins German officials including finance minister Wolfgang Schäuble in urging markets not to set too high their expectations that the European Union leaders' summit will produce a complete fix to the region's two-year sovereign debt crisis.
Also dampening sentiment was Moody's warning that it may slap a negative outlook on France's AAA rating in the next three months if the costs for helping bail out banks and other euro zone members stretch its budget too much.
The warning, which sent the risk premium on French government bonds shooting up to a euro lifetime high, came as European Union leaders are preparing measures to protect the region's financial system from a potential Greek debt default.
That plan includes a new rescue plan reducing Greece's debt, strengthening the capital of banks with exposure to troubled euro zone sovereigns and leveraging the euro zone's rescue fund to prevent market contagion to bigger economies.
Strategists said the summit remained key to market sentiment. Negotiations will begin tomorrow morning ahead of an October 21st meeting of euro-area finance ministers that starts the weekend of debt-crisis consultations, Mr Venizelos said.
Greece's situation is "extremely precarious", he said. "Everyone understands that if Greece is saved, the euro area will be saved. The opposite is also the case: if the Europeans fail in Greece, they won't be able to shield themselves."
Fresh tensions have emerged in Europe’s drive to settle the sovereign debt debacle next weekend as Germany plays for time in difficult talks on a comprehensive new deal to assert control over the crisis.
The backsliding by Germany, which is the dominant power in the euro zone, raised concern in Brussels that the ongoing effort to develop a “grand bargain” plan to root out the crisis may be compromised.
Remarks by finance minister Mr Schäuble and Chancellor Angela Merkel’s spokesman are seen to reflect deep divisions between Germany and France over core elements of the new rescue package.
Dr Merkel’s spokesman, Steffen Seibert, said the search for an end to the crisis would “surely” continue into next year. “The chancellor has pointed out that the dreams building up that this package will mean everything will be solved and over by Monday cannot be fulfilled,” he said.
Agencies
