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 tonight, 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.
The proposal from Merkel and Sarkozy seeks to enforce budget discipline either through a substantial change to the treaty governing all 27 EU countries, or an entirely new treaty for the 17 countries that use the euro.
In their letter to EU President Herman Van Rompuy, Merkel and Sarkozy stressed a decision was needed at this week's meeting to have the new treaty in place by March.
"We are convinced that we need to act without delay," they wrote.
Earlier Wednesday, U.S. Treasury Secretary Timothy Geithner struck a more optimistic tone on the prospects for a deal.
"We are very encouraged with the progress that is being made," Geithner said to reporters after meeting with French Finance Minister Francois Baroin on the second day of his whirlwind trip through Europe.