European Leaders Question Timing of Credit Downgrade Warning

Late Monday, S. P. warned that the ratings of 15 euro zone countries, including Germany and France, were vulnerable to a downgrade. On Tuesday, the agency extended its threat of a possible downgrade to include the top-notch, long-term credit rating on the European Union’s main bailout fund, if any of its gilt-edged guarantors were downgraded.

Though rating agencies have made announcements before previous meetings on the euro debt crisis, Monday’s warning was striking. Market indexes in the euro zone closed down Tuesday, while the yields on German and French bonds rose, a sign of added risk to holders of the securities.

The European commissioner responsible for financial market regulation, Michel Barnier, complained that S. P. had acted without waiting to evaluate the results of the coming two-day summit meeting in Brussels.

Jean-Claude Juncker, who heads the group of euro zone finance ministers, added during an interview on German radio, “I have to wonder that this news reaches us out of the clear blue sky at the time of the European summit — this can’t be a coincidence.”

This time S. P.’s downgrade threat was effectively a warning to European leaders of the consequences that would flow from failure to take sufficiently convincing action.

Few now dispute the central thrust of the argument advanced by the rating agency that the economy of the euro zone is deteriorating so rapidly that quick and far-reaching action is required to avert disaster.

“I actually see a positive effect, because now everyone must be aware of how serious the situation is,” Norbert Barthle, the budget spokesman for Chancellor Angela Merkel’s conservative party in Germany, told Reuters.

The German finance minister, Wolfgang Schäuble, called it the “best encouragement” to find a solution.

S. P.’s statement will prompt European leaders “to do what we’ve promised, namely to take the necessary decisions step by step and to win back the confidence of global investors,” Mr. Schäuble said.

A report on Tuesday from Herman Van Rompuy, president of the European Council, outlined a fast-track option for creating a tighter fiscal framework, or “fiscal compact,” for the 17 countries in the European Union that use the euro. This method would rush changes through and avoid the need for time-consuming approval in all 27 European Union nations.

The hope among many European officials is that an accord along these lines will give the European Central Bank political cover to intervene more aggressively to ease the crisis. It was unclear on Tuesday, however, whether the more limited “quick fix” solution — as opposed to a full modification of the European Union treaty — would allow enough change to satisfy Germany.

Speaking on a visit to Germany, the United States Treasury secretary, Timothy F. Geithner, praised recent efforts of European leaders to forge a stronger fiscal union.

“I am very encouraged by the developments in Europe in the past few weeks,” including the reform commitments in Italy, Spain, and Greece, and new steps toward a “fiscal compact,” he said in Berlin.

Asked about an enhanced role for the International Monetary Fund, Mr. Geithner responded that it was playing an important role, and that he expected it to continue to do so. He said the United States continued to support the fund “in the context of the efforts Europeans are making to build a stronger Europe.”

Speaking in Brussels, Mr. Barnier rejected the idea that the S. P. announcement was an act of revenge after the European Commission announced plans last month to tighten regulation of rating agencies.

In fact, had the new rules been in place, they would not have covered Monday’s statement. “Our proposals apply to ratings, rather than warnings, though it might be worthwhile to discuss whether they should apply to both,” said Chantal Hughes, a spokeswoman for Mr. Barnier.

Mr. Van Rompuy’s paper outlined the possibility that the euro zone’s new permanent bailout mechanism should be allowed to recapitalize banks and should itself have “the necessary features of a credit institution.”

The paper also keeps open the longer-term option of euro bonds — something ruled out by Mrs. Merkel and Nicolas Sarkozy of France on Monday.

But its main point is that an amendment of Protocol 12 of the founding European Union treaty could be agreed upon by leaders, who would simply have to consult with the European Central Bank and the European Parliament. “This decision does not require ratification at national level,” the document said.

This way countries would write into their own law an obligation “to reach and maintain a balanced budget over the economic cycle.” This could be complemented with pledges of “automatic reductions in expenditures, increases in taxes or a combination of both” when the rule was broken.

More fundamental changes and “an enhanced role for the E.U. institutions, with a higher intrusiveness in the case of lack of implementation,” would mean full treaty change, the document said.

On Tuesday, the French prime minister, François Fillon, indicated that his country was contemplating a full-scale revision of the treaty when he laid down a timetable to French parliamentarians. “Our objective it to reach a deal in March 2012 that would be ratified by the end of 2012,” Mr. Fillon said, Reuters reported from Paris.

Annie Lowrey contributed reporting from Berlin.

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