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German Chancellor Angela Merkel is under mounting pressure at home to take a much harder line against Greece and other ailing euro zone countries – both from within her own government and from the German courts. That, in turn, could make it harder to keep the 17-member euro zone from splintering apart.Markus Schreiber/The Associated Press

With the clock ticking down on Stephen Harper's self-imposed deadline to strike a wide-ranging free-trade deal with the European Union, this week's visit by German Chancellor Angela Merkel is shaping up as a key chance for the two leaders to work out the final problems.

Over dinner Wednesday at the Prime Minister's Harrington Lake cottage, followed by a morning meeting and lunch in Parliament's Centre Block, Canada will be looking for Germany to use its considerable influence within the EU to bring these talks to a close.

The Conservative government promised to complete negotiations by the end of 2012 and in spite of the numerous distractions created by the ongoing European debt crisis, both sides insist the talks are on track.

Mr. Harper and Ms. Merkel – who faces growing internal dissent at home over her approach to the European economy – agree that more trade and fewer regulations for business are the best and only way out of the crisis.

Yet nine formal rounds of negotiations have failed to produce final language around intellectual property rights, pharmaceutical patent rules and specific details on import quota changes for products like meat and cheese. The talks are now at the stage where political leaders – rather than appointed officials – will have to resolve the remaining obstacles. Two more "focused sessions" among officials are scheduled to bring the deal to a close.

Many of the areas under negotiation cover provincial files, such as access to government procurement contracts, yet Mr. Harper insists Ottawa has kept the provinces on board.

"I think it's fair to say that thus far, we've had unprecedented cooperation between the provinces and the federal government," Mr. Harper told reporters Monday in Toronto. "And I think it's important that both Canada and the European Union drive these negotiations to conclusion. But obviously as you know, nothing's settled until everything's settled."

A mood of optimism dominated financial markets during the London Olympics. But that was fading Monday, with stocks falling in 14 of 18 European markets after several weeks of gains.

George Juergens, the deputy head of mission at the German Embassy in Ottawa, says Canada and Germany are on the same page when it comes to the economy.

"We have now both reached the point where you need to find innovation in order to jumpstart the markets, be it in more creative ways of deregulating labour markets, of deregulating export markets or deregulating industry growth," he said in an interview. "It's always very nice if you have enough cash to spend it to start the economy. Right now we don't. And we need to do it differently. Maybe thinking about it together will come up with a creative idea."

Europe's debt crisis is entering a dangerous new phase as Ms. Merkel makes her first bilateral visit to Canada.

The German Chancellor is under mounting pressure at home to take a much harder line against Greece and other ailing euro zone countries – both from within her own government and possibly from the German courts. That could make it harder to keep the 17-member euro zone from splintering apart.

A top member of Ms. Merkel's Christian Democrats warned Monday that Germany would veto next month's scheduled payment to Greece if the country isn't living up to the austerity conditions of its €130-billion bailout package.

"Even if the glass is half full, that won't be sufficient for a new aid package. Germany cannot and will not agree to that," Michael Fuchs, the party's deputy parliamentary leader, told German newspaper Handelsblatt.

"A policy of the last, last, last chance won't work any more and must come to an end."

The European Commission, the European Central Bank and the International Monetary Fund are due to decide on the next instalment of the bailout next month. The ECB is also looking at a much more extensive plan to buy the embattled sovereign bonds of other indebted countries, Italy and Spain among them.

Ms. Merkel is awaiting a decision, also in September, from Germany's top court that could put at risk the creation a permanent European bailout fund – a key part of a firewall to keep the debt crisis from spreading to Italy and Spain. Several lawsuits are challenging the legality of Germany's contributions to the fund, without input from German voters or the German Parliament.

"There will be a lot to do," Steffen Seibert, Ms. Merkel's chief spokesman, acknowledged to reporters in Berlin as Ms. Merkel returned from vacation.