PARIS (Reuters) – Moody’s decision to review France’s triple-A credit rating cast new doubt on Tuesday on Europe’s hopes of drawing a line under its sovereign debt crisis, five days before a crucial EU summit.
The U.S. ratings agency said late on Monday it may slap a negative outlook on France’s Aaa rating in the next three months if the costs for helping bail out banks and other euro zone members stretch its budget too much.
The warning, which sent the risk premium on French government bonds shooting up to a euro lifetime high, came as European Union leaders are preparing measures to protect the region’s financial system from a potential Greek debt default.
That plan includes a new rescue plan reducing Greece’s debt, strengthening the capital of banks with exposure to troubled euro zone sovereigns and leveraging the euro zone’s rescue fund to prevent market contagion to bigger economies.
German leaders on Monday doused market hopes of a miracle cure at Sunday’s Brussels summit, saying no one should expect a “definitive solution.