BERLIN - German and French officials lowered expectations Wednesday for a deal to save the euro at this week's European summit, deflating investors' hopes for an imminent resolution to Europe's debt crisis.
On the same day that German Chancellor Angela Merkel and French President Nicolas Sarkozy released the details of a plan for European nations to submit their economies to tighter scrutiny, a senior German official suggested a deal could be weeks away.
The summit, which begins Thursday night, has been described as do-or-die for the 17 countries that use the euro. A growing number of eurozone economies are being dragged down by crippling debts.
Further urgency was added Wednesday after the ratings agency Standard & Poor's threatened to downgrade the bonds of all EU countries because their economies were intricately linked with those in the eurozone. That would likely make it more expensive for governments to borrow.
Earlier this week, expectations had been rising that an agreement would be reached this weekend, paving the way for the European Central Bank to take bolder action to reduce borrowing costs for Italy, Spain and other heavily indebted countries. That would give governments time to strengthen their finances.
But on Thursday the senior German official, who spoke on condition of anonymity because talks were ongoing, said reaching a deal might take until Christmas. European stocks, which had opened the day higher, fell after the comments were made and borrowing costs for weak eurozone governments rose.
"There is a very, very strong expectation that the summit is going to be a success so there is some potential for disappointment," said Stefan Schneider, chief international economist at Deutsche Bank. "But if there is a convincing plan, which - in contrast to some of the previous plans - might survive the next two or three weeks, then that could support markets in the first two or three months of next year."