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Subscribe to RSSRatings agency Standard & Poor's injected urgency into talks aimed at saving the euro currency from collapsing under the weight of huge state debt by warning Thursday that it may downgrade the bonds of all 27 EU nations.
The ratings agency said it was placing the EU's AAA long-term rating on so-called CreditWatch negative. The warning came just days after S&P put a large number of the 17 euro countries on notice for a possible downgrade, including Germany and France.
"The CreditWatch on the EU is an expression of our concerns about the potential impact on the future debt service capacity of eurozone sovereigns, and therefore also the EU, in the context of what we view as deepening political, financial, and monetary problems within the eurozone," S&P said.
The European Union has had a top-notch AAA rating since the mid-1970s.
Meanwhile, German Chancellor Angela Merkel and French President Nicolas Sarkozy were heading to Marseille to meet with heads of state and government from the center-right European People's Party before moving on to Brussels for a crucial EU summit, with the 17-nation eurozone's fate in the balance.
Earlier, a French minister said the fate of the euro was at stake, but the chairman of euro area finance ministers said the currency itself was not at risk.
'A catastrophe'
The French official, Europe minister Jean Leonetti, said that Treasury Secretary Timothy Geithner had warned on Wednesday that the whole world was watching the euro zone.
"What that means ... is that the euro can explode and Europe come apart. That would be a catastrophe not only for Europe and France but for the world," Leonetti told Canal+ television.
With a meeting of European leaders meeting looms to discuss the Eurozone crisis, Germany is anxious it will end up paying more for the debts of other countries. In the lives of many Germans, debt is an alien concept. ITV's Richard Edgar reports.
An overhaul of the euro zone's fiscal rules would boost the chances that the European Central Bank, which is expected to cut interest rates and announce new support measures for banks later on Thursday, would intervene more aggressively to calm the crisis.
Certain provisions in the Franco-German proposal, such as setting automatic penalties for countries that overspend, are controversial and have the potential to delay an agreement.
U.K. Prime Minister David Cameron is also wary Britain might lose influence in Europe if France and Germany create a tighter club of eurozone nations, and fears a dilution of Britain's decision-making powers to Brussels.
Reuters and The Associated Press contributed to this report.