PARIS — Seeking to restore confidence in the euro, the leaders of France and Germany jointly called for changes to the European Union treaty Monday so that countries using the euro would face automatic penalties if budget deficits ran too high.
But not everyone on Wall Street was reassured that Europe would get control of its 2-year-old debt crisis.
Stock prices rose and borrowing costs for European governments dropped sharply in response to the changes proposed by French President Nikolas Sarkozy and German Chancellor Angela Merkel. But some of the optimism faded late Monday when Standard & Poor’s threatened to cut its credit ratings on 15 eurozone countries, including the likes of Germany, France and Austria which have been considered Europe’s safest government-debt issuers.
The announcement came only hours after Sarkozy and Merkel revealed sweeping plans to change the EU treaty in an effort to keep tighter checks on overspending nations. The proposal is set to form the basis of discussions at a summit of EU leaders Thursday and Friday that is expected to provide a blueprint for an exit from the crisis.
While the Franco-German plan would tie the 17-eurozone nations closer together, a tighter union would likely also result in heavier financial burdens for the region’s stronger economies, which have already put up billions of euros to rescue Greece, Ireland and Portugal.
EU treaty changes could take months, if not years, to implement and don’t wipe away the mountains of government debt dragging down Europe’s economy. But preliminary buy-in Friday from the 17 countries that use the euro could set the stage for further emergency aid from the European Central Bank, the International Monetary Fund or some combination.
