Standard & Poor's (S&P) put European markets on edge this morning by warning that all 17 Eurozone countries could see their credit ratings downgraded.

The credit ratings agency has put the single currency members on ‘negative watch’, indicating that there is a 50/50 chance of downgrades, although no changes will be made before the EU summit on Friday 9 December.

S&P claimed it had imposed the negative watch because, ‘systemic stresses in the Eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the Eurozone as a whole’.

These stresses include tightening credit conditions, the rising risk of Eurozone recession and the failure of European leaders to work together to solve the crisis.

The countries under watch include the remaining Eurozone AAA-rated Economies of Germany, France, Austria, Finland, Luxembourg and the Netherlands.

The only countries to miss out on the change are Cyprus, as it is already on negative watch, and Greece, which had previously seen its bonds downgraded to junk by the ratings agency.

Markets around Europe have reacted fairly negatively, with the FTSE 100, German DAX 30 and French CAC 40 all trading slightly down, while government bond yields for Italy and Spain are creeping slowly upwards.

European ministers have condemned the timing of the announcement. The Governor of the Bank of France, Christian Noyer, blamed S&P for politicising its methodology and becoming a ‘motor of the current crisis’.

However, Josh Raymond, chief market analyst at City Index, claimed that it could be a positive influence on the EU summit.

He said, ‘The move by Standard and Poor's is timed well to put additional pressure on European leaders to make real progress at the EU Summit in Brussels but timed badly to keep investors on edge.

‘If EU politicians needed any reminder of what the fallout would look like by a failure to deliver credible EU Treaty change agreements and allowing the European Central Bank to boost its bond purchases, the S&P provided it last night.

‘The move, in truth, does not change much in the run up to the EU Summit, but it does make the likely fallout from a lack of agreement more transparent.’