Standard and Poor has threatened Europe with a global financial penalty as of Monday. Including Greece and Cyprus, there are now 15 countries under review and facing negative implications. This list includes Austria, Finland, Luxembourg, the Netherlands and Germany, which today still enjoy a triple A rating but which could fall to AA+. So, while time is short, many thorny issues remain.
In the first part of the debate, on economic issues, the leaders will discuss possible ways to strengthen financial intervention in response to the worsening crisis. Allowing the European Central Bank to relieve the most indebted countries in the euro area, an issue essential to Britain, is being refused by Germany, but accepted by France.
The concept of sharing public debt through the creation of Eurobonds, an idea supported by the European Council President Herman van Rompuy, is contrary to the priorities of the Franco-German tandem. Angela Merkel and Nicolas Sarkozy are focused on strengthening fiscal discipline through the establishment of binding rules on budgetary balance and automatic penalties for countries whose deficits and debt amounts exceed agreed-to limits. Such measures of economic governance will require treaty revisions, which will need to be approved by the 27 members of the EU, or at least by the 17 countries of the euro area.
Once again, this EU summit is crucial, and EU leaders must rise to the occasion. A lack of satisfactory answers is likely to cause all euro area countries to see their ratings lowered immediately.