European leaders are running out of time to prevent euro zone debt problems turning into a full-blown global crisis, Canadian Finance Minister Jim Flaherty said on Monday after Germany warned a breakthrough was unlikely at a summit this weekend.

Financial markets have risen in the past week on hopes that a firm plan to draw a line under the two-year-old crisis would be struck at a European Union summit on Sunday, but Germany lowered expectations of a breakthrough on Monday.

Speaking at an event in Dublin, Flaherty said that if the crisis was left unaddressed, it would eventually become too big for Europe to solve and immediate action was therefore needed to stop the crisis from becoming even more costly.

This is the world's most immediate and pressing problem. It threatens Europe, and it threatens the strong, sustainable, and balanced growth that G20 countries have made their priority, Flaherty said in a speech.

Sadly, time is running out and the message still needs to be repeated ... Unless decisive action is taken urgently, our nations will once again be forced to respond to a full-blown global crisis.

Asked about German Finance Minister Wolfgang Schaeuble's warning on Monday that there would be no definitive solution at this weekend's meeting, Flaherty said he was disappointed.

This situation does not improve with time. This is not a fine wine, he said.

Flaherty said Europe must take action to resolve sovereign debt and banking system issues -- including recapitalizing banks -- that proves decisive enough to overwhelm the problem and restore market confidence.  

He said it must also implement plans for debt and deficit reduction that are clear, credible and fearless, and decide whether it will support Greece unequivocally or face the natural consequences of not doing so.

The Canadian finance chief told Irish radio earlier on Monday that European banks would probably have to take larger write-downs on Greek debt and must negotiate haircuts as big as necessary to resolve what has become a very dangerous situation.

He added that Europe could have contained the crisis but instead let it grow due to a disappointing response and that the state rescue of Franco-Belgian lender Dexia SA should be a sufficient signal that action is needed now.

The good news is that this crisis can still be contained and reversed, if nations summon the determination to do so. The bad news is that this crisis has already cost way too much, Flaherty said.

Too much time has been wasted. Too many opportunities have been missed.