The first reports of the agency’s action, published before the markets closed, led United States Treasuries to rally strongly, the euro to fall and stocks on Wall Street to lose some of their earlier gains.
The action by Standard Poor’s, which had never before threatened France and Germany’s top ratings, came at the beginning of an important week in Europe, with European Union leaders gathering in Brussels on Thursday and Friday to try to finally stop the crisis.
But the move was also likely to stir further anger among European politicians who have argued that previous credit downgrades of countries like Spain and Italy have worsened the crisis.
The agency said 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.”
Standard Poor’s said it hoped to complete its review of the nations’ credit risks “as soon as possible” after the Brussels summit meeting. “If the response of policy makers is not viewed by investors as robust, we believe market confidence could take another, possibly steep, drop downward,” the agency said.
In addition to Germany and France, S. P. named the Netherlands, Austria, Finland and Luxembourg as countries that could lose their AAA rating. That underscores just how far the crisis has spread, because those nations were considered the safest. The other countries in the euro zone do not have the top rating. Cyprus was already on credit watch, and Greek debt has been downgraded to junk status.
The agency warned that ratings could be lowered by “up to one notch for Austria, Belgium, Finland, Germany, Netherlands and Luxembourg, and by up to two notches for the other governments,” including France.
President Nicolas Sarkozy of France has made it a priority of his coming presidential re-election campaign to ensure that France keeps its flawless credit rating — a feat that has grown more difficult as France’s efforts to keep the euro from fracturing become more costly.
Mr. Sarkozy and Chancellor Angela Merkel of Germany met in Paris on Monday, agreeing to propose changes to Europe’s underlying treaties to impose greater fiscal discipline on profligate nations’ budgets.
The warning from Standard Poor’s chimes with the feeling in Europe that time is running out. Germany, in particular, is asking that a new system of monitoring and punishments for overspending countries be put in place to stop a similar crisis from happening again.
In the United States, reports of the impending action, first reported by The Financial Times, affected Treasuries the most. They rallied in the afternoon, “suggesting a flight to safety,” said Guy LeBas, an economist at Janney Montgomery Scott. “It definitely had a sizable effect.” After rising earlier, 10-year Treasury yields fell to about 2.03 percent.
Last week, investors seemed to be increasingly hopeful of a quick solution to Europe’s debt crisis. But on Monday, stock markets gave up some of their gains for the day. Wall Street, up about 1.8 percent in the early afternoon, ended up about 1 percent. Some Wall Street analysts viewed the announcement as a reminder about what was at stake this week.
“You could call this a nudge from behind,” said Andrew Wilkinson, chief economic strategist at Miller Tabak Company in New York. “Yes, there’s every chance there could be downgrades, but investors will be very unfriendly to the euro zone in general if there is no improvement this week in terms of a plan.”
Last month, another big rating agencies, Moody’s Investors Service, issued its own bleak report on Europe’s sovereign debt crisis, warning of rising prospects for multiple defaults by countries in the euro zone and of credit rating downgrades of nations across Europe if leaders failed to resolve their problems.
In its announcement Monday, Standard Poor’s blamed tightening credit conditions, disagreement about how to restore investor confidence and bring about long-term economic convergence, rising government and household debt and a growing risk of recession in 2012.
Liz Alderman contributed reporting.
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