S&P piles pressure on Franco-German EU budget plan
By Catherine Bremer and Daniel Flynn
PARIS (Reuters) - The leaders of France and Germany agreed a master plan involving treaty change on Monday to impose budget discipline across the euro zone as a top rating agency piled on pressure for a rapid solution to the EU debt crisis.
Standard & Poor's said it had told 15 of the 17 euro zone countries, including Germany, France and four others with the top AAA credit rating, that it might downgrade them en masse within 90 days, depending on the outcome of a crucial EU summit on Friday.
President Nicolas Sarkozy and Chancellor Angela Merkel said their proposal included automatic penalties for governments that fail to keep their deficits under control, and an early launch of a permanent bailout fund for euro states in distress.
They said they wanted treaty change to be agreed in March and ratified after France wraps up presidential and legislative elections in June. "We need to go fast," Sarkozy said.
Italy, the biggest euro zone nation in trouble, offered a glimmer of hope that the bloc could halt a crisis that is threatening the survival of the common currency. Its borrowing costs tumbled after its new technocrat government announced an austerity program.
French Finance Minister Francois Baroin said S&P's move did not take into account Sarkozy and Merkel's announcement.
After about two hours of talks with Merkel in Paris, Sarkozy told a joint news conference: "What we want ... is to tell the world that in Europe the rule is that we pay back our debts, reduce our deficits, restore growth."
Merkel added: "This package shows that we are absolutely determined to keep the euro as a stable currency and as an important contributor to European stability." Continued...