France

Credit rating agency Moody's has downgraded three of France's largest banks, warning their creditworthiness has been damaged by the European debt crisis.

Angela Merkel and Nicholas Sarkozy are set to meet today as political commentators warn Europe is entering the end game for the crisis, which must be resolved this week to save the euro.

Key eurozone sovereign debt yields have fallen sharply after successful debt auctions and comments from ECB president Mario Draghi boosted investor confidence.

Credit rating agency Moody's has warned on the status of France's AAA-rating after the yield on its bonds spiked last week.

The euro weakened this morning as the cost of insuring French bonds climbed to a record, Spanish yields rose and european equities retreated for a second day.

Ratings agency Standard & Poor's (S&P) was last night at the centre of a storm after it accidentally downgraded France's AAA rating.

Fears of France and Spain being the next to suffer in the eurozone debt crisis intensified as 10-year bond spreads reached euro-era highs above German yields yesterday.

The loss of France's AAA-rating would be a worse scenario for the global economy than the downgrade of the US, said Ignis chief economist Stuart Thomson.

France has slashed growth expectations for next year in a move which will boost fears about the lack of economic activity in Europe.

Standard & Poor's last night warned it is likely to downgrade the sovereign debt credit ratings of France, Spain, Italy, Ireland and Portugal if the economic slowdown intensifies.