The warning late on Friday, the second time in two weeks that the bloc has been threatened with multiple ratings markdowns, heightened pressure on leaders to get to grips with the turmoil.
Fitch also said it might also cut AAA-rated France within two years and urged the European Central Bank to take a more active firefighting role.
One ECB policymaker said yesterday that time was running out to come up with solutions to a crisis that could spark a global slump. Another said the bank would not expand the bond buying programme it launched to keep a lid on vulnerable states’ debt costs.
Underscoring tensions within the bloc, a week after a key EU summit failed to reassure financial markets the crisis was being tackled, Italy’s Prime Minister Mario Monti urged EU policymakers on Friday to beware of dividing the continent.
ECB ratesetter Erkki Liikanen said that, to prevent a flurry of ratings downgrades and a credit freeze, the continent’s leaders needed to act fast to beef up the rescue funds designed to provide a safety net for debt-laden member countries.
“The worst scenario is that the negative cycle continues, uncertainty grows, which would lead to a global recession,” Liikanen – a member of the bank’s governing council -told Finnish public broadcaster YLE in an interview yesterday.
International Monetary Fund head Christine Lagarde had said no country was immune from the crisis and each needed to act to head off the risk of a global depression.
In a swipe against Germany, Italy’s Monti said Europe’s response “should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigour in some countries”.
Pushing for governments to eliminate their bloated budget deficits, Germany has led resistance to allowing the ECB to ramp up its bond purchases to a big enough scale to douse the crisis.
But Fitch added to the pressure for just such a move.