Upcoming European Union summit is unlikely to solve continent's debt crisis, says German Chancellor Merkel, adding that summit is only a step, and resolution will 'continue far into next year'

Cindy Allen

BERLIN , October 17, 2011 (Associated Press) – German Chancellor Angela Merkel's spokesman on Monday dampened expectations that an upcoming weekend EU meeting will solve the European debt crisis, saying it is only an "important step" on a long road that will continue far into next year.

Hopes had previously been high, after Merkel and French President Nicolas Sarkozy said earlier this month the EU summit would yield a "comprehensive response" of measures to counter the debt crisis.

Such a plan is widely expected to focus on lightening Greece's debt load, making banks raise more money and boosting the effectiveness of the eurozone bailout fund's lending capacities.

But Spokesman Steffen Seibert downplayed suggestions it would spell the end of the crisis.

"The chancellor has said that the dreams that are taking hold again, that with this package everything will be solved and everything will be over on Monday, will again not be fulfilled," he told reporters in Berlin.

"These are important steps on a long path, and that is a path that will continue far into next year where other steps must follow," he said.

Markets rallied last week and opened higher on Monday on hopes that the plan would mark a turning point for the beleaguered 17-nation currency zone. That optimism petered out by early afternoon on Monday, however, with the euro and many stock indexes trading slightly lower after the German comments.

Seibert would not give any more details about the ongoing discussions between European countries, saying "the debates will be held internally and made public on the weekend."

German Finance Minister Wolfgang Schaeuble said Sunday that private holders of Greek bonds would likely have to endure bigger voluntary losses than the 20 percent level set in a July agreement. That is considered crucial if Greece is to have a fighting chance of emerging from its massive debt hole.

On Monday in Duesseldorf, Schaeuble also said not to expect a definitive solution to the financial crisis at the Sunday summit of EU leaders, the dapd news agency reported.

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