S&P Threaten To Derail Euro Rescue

A major credit ratings agency has sent shockwaves through Europe just as Germany and France broker a last minute deal to save the eurozone.

Standard & Poor warned on Monday evening they were considering downgrading the credit rating of a swathe of European countries, including it's two largest and leading members, France and Germany.

A drop in credit rating would see borrowing costs for all countries affected soar – a process that has led to the threat of default by a number of countries already, most notably Greece, and could spread to Europe's largest economies.

According to the BBC, the ratings agency said the decision was prompted by "our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole".

The news has devastated efforts by the German and French leaders, Angela Merkel and Nicolas Sarkozy, who struck a controversial deal only hours before S&P's announcement, that was hoped to save the euro and restore confidence in the single currency.

The deal would have seen the Lisbon treaty rewritten to facilitate new eurozone arrangements, and if unsupported by the European Union in general, then the 17 countries using the single currency would agree a new euro arrangement between them.

The new eurozone regime would be given punitive powers with automatic sanctions being levied against countries breaching budget deficit limits.

Since S&P's announcement, both the French and German leaders have reaffirmed their commitment to their eurozone reforms, with both countries saying proposals for a treaty change would reinforce governance of the eurozone.

However, any renegotiations of the treaty could prove very challenging for Prime Minister David Cameron who will come under extreme pressure to call for a referendum on the Euro from his backbench if constitutional changes are required.

(DW)