European leaders are running out of time to resolve the financial crisis afflicting the region, making those leaders' summit on Friday more important than any that has preceded it, according to Moritz Krämer, managing director of European Sovereign Ratings at Standard & Poor's.
"After two years of crisis management which has failed to stem and arrest the crisis we feel the time is running shorter to stem the crisis. This summit's success is more critical than ever before," he said.
"This summit and possible other steps have a very important trajectory of this crisis, given the lack of success of past summits. It is particularly important and a disappointment would lead to a deep letdown and would increase risk of recession," Kramer added.
On Monday the agency issued an unprecedented warningto the euro zone that a mass credit rating downgrade of the single currency members, including Germany, would occur if an agreement on resolving the crisis is not reached at this week's summit of European Union leaders.
S&P placed the ratings of 15 euro zone countries on credit watch negative citing "systemic stresses" in the region.
Representatives of some euro zone member states slammed the S&P move, with European Central Bank governing council member Christian Noyer saying the agency's methods of evaluating the creditworthiness of countries have become increasingly political, according to Reuters.
"The agencies were one of the motors of the crisis in 2008. Are they becoming a motor in the current crisis? That's a real question we all need to think about," Noyer said at a conference on corporate finance in Paris, quoted by Reuters.
Standard & Poor's defended the timing of its decision to issue a credit warning to 15 euro zone countries as France and Germany kicked off their week of pre-summit talks.
"We are not in the business of advising or influencing policy. Our business is assessing risks and communicating them to investors as we see them in a timely fashion, which is what we have done," Krämer said.
However, Krämer would not be drawn into giving a specific date for the conclusion of the analysis saying that the process would need to analyze the details of any deal from the summit.
"It is very difficult to answer as we will have to analyze in great detail what the intentions are. We need to see what the timeframe is, what are the pitfalls, what are the prospects assuming there is a robust, stable package. Our decision will critically depend on what the actual outcome is. At this particular juncture this summit is of utmost importance and the stakes have risen compared to previous summits," Krämer said.