Eurozone debt crisis deepens

In a move that will pile pressure on eurozone leaders and is likely to hit markets, it emerged that ratings agency Standard & Poor’s had put all but two euro nations on credit watch.

The only two not named were Cyprus, which was already under review, and Greece, which holds the world’s worst rating.

The bombshell came as eurozone leaders frantically tried to prevent the break-up of the single currency and restore stability after weeks of mounting crisis.

After emergency talks in Paris yesterday, French President Nicolas Sarkozy and German Chancellor Angela Merkel renewed calls for EU Treaty change to solve the single currency crisis.

They said they wanted change to be carried out by all 27 member states if possible - or at least the 17 eurozone countries.

The aim would be to allow far tougher rules and sanctions governing the eurozone in future to reassure markets about the euro’s long-term stability.

The talks marked the start of a week of intense efforts to settle a eurozone stability deal to convince markets once and for all that the single currency can survive the current economic turmoil.

The key plan is to toughen eurozone checks and balances - something lawyers say will need treaty change.

The move towards treaty changes prompted fresh difficulties for Prime Minister David Cameron as eurosceptic Tories stepped up calls for a referendum on the European Union.

Downing Street insisted that the scale of the proposal - to be put to an EU summit later this week - did not amount to change warranting a referendum in the UK.

But Work and Pensions Secretary Iain Duncan Smith sided with the eurosceptic right in the Tory Party by suggesting that the impact from any treaty change would demand a national vote.

“The Prime Minister has always been clear, if there are substantial changes that affect Britain’s position, then he would go for a referendum because that’s what we said to the British public we would do,” said Mr Duncan Smith.

Mr Cameron, who will attend a meeting of the European Council in Brussels later this week, insisted nothing had changed to justify such a move.

“Clearly, there are negotiations going on in Europe. I will be part of those negotiations on Thursday and Friday,” he said.

“If there is a treaty at the level of 27, and if that passed powers from Britain to Brussels, there would be a referendum.

“We have legislated now so that it is impossible for a British government to pass power from Britain to Brussels without asking the British people in a referendum first.

“As Prime Minister I am not intending to pass any powers from Britain to Brussels, so I don’t think the issue will arise.

“But the British people should know that, as an absolute safeguard, if power goes from Britain to Brussels they get a say-so first, and quite right too.”

Leading Tory eurosceptic Bill Cash said: “This is a major treaty change, whether it is for the eurozone 17 or the EU 27, because it fundamentally changes the relationship of Britain to the EU.

“It therefore requires a referendum, irrespective of the attempt to bypass the British people with the European Union Act this year.

“Ideally the treaty should be vetoed but if the Government is determined to persist then it must hold a referendum.”

He said the proposed treaty change would pave the way for a “fiscal union” of the 17 eurozone countries, undermining the single market and destabilising the City of London. It amounted to “a bid for political union” and “the British people whose lives are affected must be allowed to have their say”.

UK Independence Party leader and MEP Nigel Farage said: “If all member states are to implement treaty changes, then David Cameron must give the people of the UK the referendum he promised.

“Failure to do so will see not only a Tory backbench revolt, but a rebellion at the ballot box.”