S&P puts Germany, France and 13 other European nations on review for possible downgrade
Under growing pressure from nervous financial markets, the leaders of France and Germany reached a compromise agreement Monday to seek mandatory limits on budget deficits among debt-laden European governments.
The limits—a “golden rule” of 3 percent of Gross Domestic Product—would be enforced by leaders of the European Community, according to explanations provided by President Nicolas Sarkozy of France and German Chancellor Angela Merkel at a joint news conference here.
Governments whose debts exceeded three percent of their GDP would be cited by the European Court of Justice, after which a super-majority of 85 percent of European governments would have to agree to impose some sort of sanction against the offending country.
The new rules would be part of a renegotiated European Union treaty that is to be completed by March and ratified two months later, Sarkozy and Merkel said. The speeded-up calendar is designed to show global financial markets that the 27-nation European Union is serious about bring its debt problem under control once and for all.
The Franco-German accord is to be outlined in a letter to European Union leaders Wednesday and voted on at a special summit conference Thursday. Sarkozy said the hope is that all 27 nations will adhere to the plan. But he added that it could also move forward with consensus from only the 17 countries that use the euro as their common currency.