- The German government sent mixed messages about solving the eurozone debt crisis
- Officials dampened expectations of "bold steps", adding to investors' confusion
- Investors predicted falls in both European stock markets and the euro, as a result
The German government sent mixed messages about the chances of reaching a solution to the eurozone debt crisis this weekend, with officials and politicians dampening expectations and talking of "bold steps", adding to investors' confusion.
Chancellor Angela Merkel's spokesman on Monday morning tried to play down expectations for a solution to the eurozone debt crisis at Sunday's European Union summit, a position reiterated in an early speech by Wolfgang Schäuble, finance minister, in which he said the meeting would not reach a definitive solution.
By mid afternoon in another speech in London, Mr Schäuble gave a more upbeat message, saying that "the time for bold steps is now".
Investors took the messages from German politicians and officials to indicate the summit was likely to disappoint expectations, leading to falls in both European stock markets and the euro.
Attempts to manage expectations before important European summits are however common and similar pessimism was on display before the May 2010 summit which then surprised markets when it announced a $1,000bn package in an early attempt to resolve the Greek crisis.
On Saturday the Group of 20 finance ministers called on the eurozone for a "decisive" package of measures to resolve the concerns hanging over the European economy, its banks and sovereign debt.
But markets' optimism was shortlived after Ms Merkel's spokesman briefed journalists. He said the chancellor was adamant that "dreams currently doing the rounds" that "everything will be solved and everything will be over on Monday" were misplaced.
This line fitted with past statements by Ms Merkel warning that the eurozone's path out of the crisis would be slow and tricky, as it would among other things involve tough reforms in a number of the bloc's member states.
But at the same time Ms Merkel's spokesman said the summit should see governments take "important steps" towards solving the crisis -- a sentiment which was augmented by Mr Schäuble later in the day to be "bold steps".
The German finance minister outlined his expectations for the summit as a deal to provide systemic banks with sufficient capital, an enhanced European financial stability facility to be used in a "flexible and efficient" way, a solution for Greek debt following the Troika report on Wednesday which was likely to see bigger write-offs, structural and fiscal reform in countries -- Spain and Italy -- not officially supported on lending programmes; and enhanced European governance including the ability for the centre to impose policies on countries that do not adhere to fiscal or competitive guidelines.
With Berlin expecting the so-called Troika report on the state of Greece's economy and finances as early as this Wednesday, German government officials were already preparing to inform parliament about the report and possible implications before the end of the week. Officials said Mr Schäuble was scheduled to brief the Bundestag's mighty budget committee about the situation in Greece on Thursday, with Ms Merkel billed to inform the full chamber about the EU summit on Friday morning -- although officials stressed she was not planning to divulge details.