The move means six countries with the top AAA ratings – including France and Germany – would have a 50% chance of seeing their ratings downgraded.
Austria, the Netherlands, Finland and Luxembourg also currently have top AAA rating.
S&P said it wanted to see speedy action to resolve the debt crisis.
It is quoted in the Telegraph as telling member nations the “lack of progress European policymakers have so far made in controlling the spread of the financial crisis may reflect structural weaknesses in the decision-making process within the eurozone and European Union”.
At meetings in Paris ahead of an EU summit on Friday, German Chancellor Angela Merkel and French President Nicolas Sarkozy discussed a new European treaty that would create a “golden rule” of balanced budgets for eurozone states.
Members would face automatic sanctions for large deficits.
As well as rallying stock markets, the announcement saw the costs of borrowing for Italy and Spain fall by half a percentage point and the euro strengthen against the dollar.
The main points of the new treaty:
- Automatic sanctions for breaching deficit ceilings of 3% of GDP and a requirement for balanced budgets.
- Speeding up implementation of the permanent bailout funds, the European Stability Mechanism, to 2012, with the introduction of qualified majority – 85% – for decisions, instead of unanimity.
- No more haircuts for bondholders.
- A monthly meeting of eurozone leaders until crisis ends, focusing on growth in Europe.
- ECB’s role to remain unchanged – will not be lender of last resort – and there will be no eurobonds.
