The only two countries not put on credit watch on December 5 were Cyprus, which is already under review, and Greece, whose rating has already been severely downgraded.

The ratings agency said the decision was prompted "by our belief that 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".

S&P's move means six countries with top AAA ratings would have a 50% chance of seeing their ratings downgraded.

The news came as a surprise to investors and saw stocks fall back on early gains as the euro also fell.

France and Germany say a new EU treaty is needed to tackle the crisis.

The proposal came after talks in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel.

They said all 17 eurozone states should face greater checks on their budgets and sanctions if they run up deficits, and that a new treaty should be completed by March to ensure such a crisis never happened again.

The Paris talks come ahead of an EU summit on December 9 that is being seen as crucial for the future of the single currency.

Early reports of the move had an impact on the financial markets.

The benchmark Dow Jones index closed up 78.4 points having lost ground from far stronger gains earlier in the day. The euro fell 0.5% against the dollar to US$1.338.