Euro - more pessimistic than last week about reaching an overall deal

As investors await Friday’s European Union summit in which policymakers are expected to craft the next set of measures to deal with the sovereign debt crisis, a senior German official expressed a particularly cautious view on the summits’ likely outcomes.

“I have to say today, on Wednesday, that I am more pessimistic than last week about reaching an overall deal … A lot of protagonists still have not understood how serious the situation is,” the official stated at a pre-summit briefing, according to Reuters.

“My pessimism stems from the overall picture that I see at this point, in which institutions and member states will have to move on many points to make possible the new treaty rules that we are aiming for,” added the official, who spoke on condition of anonymity.

Other highlights from the report included:

President Nicolas Sarkozy and Chancellor Angela Merkel detailed their plan to amend the EU treaty to anchor stricter budget discipline in the euro area in a letter to European Council President Herman Van Rompuy on Wednesday…The French finance minister said the leaders of France and Germany would not leave Friday’s European Union summit until a ”powerful” deal is reached to restore market trust and prevent the sovereign debt crisis spiraling out of control.

One key uncertainty hanging over the summit is whether the EU treaty can be changed quickly to strengthen budget control.

Van Rompuy says tighter budget oversight sought by Paris and Berlin for the euro area could be achieved quickly by tweaking a protocol to the EU treaty that would not require full ratification procedures in many countries. The German official dismissed that idea as a “trick.”