German Chancellor Angela Merkel speaks to France's President Nicolas Sarkozy after a joint news conference at the Elysee Palace in Paris on Dec, 5, 2011. France and Germany have agreed on a series of reforms to address the euro zone sovereign debt crisis that will be presented to the EU President on Wednesday.John Schults/Reuters
Standard & Poor's warned on Monday it may carry out an unprecedented mass downgrade of euro zone countries if EU leaders fail to reach an agreement on how to solve the region's debt crisis in a summit later this week.
The ratings agency placed the ratings of 15 euro zone countries, including top-rated nations Germany and France, on credit watch negative – a move that signals a possible downgrade in no later than three months.
S&P said, however, it expects to conclude its review "as soon as possible" following this week's summit of EU leaders on Friday.
The action was "prompted by our belief that systemic stresses in the euro zone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the euro zone as a whole," the ratings agency said in a statement.
Of the 17 countries forming the euro zone, Cyprus' rating was already put on credit watch negative by S&P and Greece is rated double-C, which already denotes high possibility of default in the near term.
If the downgrade materializes, countries such as Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg would likely have their rating cut by one notch. The other countries could suffer downgrades of up to two notches, S&P said.
News of S&P's move their gains and the euro to erase early gains. U.S. stock index futures slipped further after the announcement, which came with U.S. markets closed.
The other two major ratings agencies, Moody's and Fitch, have already said they could soon review the ratings of top-rated euro zone countries, but they still maintain a stable outlook on them.