And then there were 12 … AAA-rated economies worldwide, that is. That’s of course if the desperate to be relevant Standard & Poor’s ratings group follows through with this morning’s warning and chops the AAA ratings on half a dozen of Europe’s most important or creditworthy countries, including Germany, France and Holland.

According to that report, S&P later today will warn that Germany and the five other triple A members of the eurozone risk losing AAA ratings because of the deepening economic and political crisis in the zone. In effect, the ratings group is telling Europe that it is not impressed at what has so far been done to halt or the crisis, or holds much hope that this week and the summit on Friday, will change that view. While to many it will grate that a ratings group has issued this warning, given their central role in the GFC, but someone has had to tell Europe that years of dithering have to stop and tough decisions are needed, right away.

The six are: Germany, France, the Netherlands, Austria, Finland, and Luxembourg and S&P will put them on what it calls “creditwatch negative”, meaning there is a one-in-two chance of a downgrade within 90 days (or by early March).

If they lose their ratings, that leaves a dozen countries with AAA ratings from S&P. The largest economy would be Britain (but with the dodgiest debt and deficit position), with Canada and Australia the next two largest. Sweden, Norway, Denmark, Singapore, Liechtenstein, Guernsey, Hong Kong, Isle of Man and Switzerland round out the dozen. The Fitch ratings group last week upped Australia’s rating to AAA, a rare upgrade in the present climate. All 12 have stable outlooks.

For France, the pressure is especially intense because Moody’s and Fitch have already warned that the country faces the loss of its AAA rating because of the deepening crisis and the rising cost of borrowings for the country.

S&P warned that all six could see their ratings could be lowered to AA+ if the creditwatch review failed to convince its experts. Markets have been braced for a downgrading of France, but not many expected Germany, the anchor of the eurozone, to have its ratings placed on notice. On Germany, S&P said it was worried about “the potential impact (…) of what we view as deepening political, financial, and monetary problems with the European economic and monetary union.”

The warning came hours after French President Nicholas Sarkozy and German Chancellor Angela Merkel met (again!) to try and come up with a common position ahead of Friday’s EU leaders summit, which is supposed to finally do something decisive to markets the crisis is being addressed and handled in a manner that will control it.

The meeting saw the two leaders agree that a new EU treaty is needed, by March next year, with tougher budgetary rules to deal with the eurozone debt crisis.

“The goal that we have with the chancellor is for an agreement to have been negotiated and concluded between the 17 members of the eurozone in March, because we must move quickly,” Sarkozy said, warning of a “forced march to re-establish confidence in the euro and the eurozone”. He said that the new treaty would be either for all 27 EU members or for the 17 members of the eurozone, with other nations signing on a voluntary basis.

But the big development from this meeting is Germany’s decision to drop its insistence that private investors play a part (share the losses) in any sovereign restriction. That means Greece is not a one-off. It is also a fudge because it means the strained banks in France (and some in Germany), Italy and Spain won’t have to slash lending and sell assets and raise more capital

Seeing that original idea was for no statement to be issued after this meeting, so as to avoid the impression that Germany and France were trying to impose their will on the rest of Europe ahead of the summit, it wasn’t a good start. But there was no detail about what would happen in the meantime to convince markets (and S&P) that the crisis would not continue deepening until next March.

The S&P warning will hopefully bring the 27 member EU and the 17 member eurozone back to reality and away from the political process.

It said in its statement that it would conclude its review “as soon as possible” after the summit. It told governments: It “is our opinion that the lack of progress the European policymakers have so far made in controlling the spread of the financial crisis may reflect structural weaknesses in the decision-making process within the eurozone and European Union”.

A downgrade will make the job of devising a stability package for the eurozone as a whole much more difficult. At the moment it is founded on the AAA ratings of the six countries, led by Germany. A downgrade will not only make the future defence of the zone much tougher, but will raise the cost of paying for the bailout packages already agreed to for Europe, Portugal and Ireland.

Italy on Monday detailed its multibillion euro austerity package and Ireland last night revealed a further €3.8 billion in spending cuts and taxes rises. The government told the country that they had to expect years more of austerity. Last week the UK government confessed that the country faces another six years of austerity, with little if any pay rises (and falls in real income), job cuts and spending restrictions.

Market yields on Italian debt fell under 6% after the details of the package were revealed, which is probably a bigger development than the France-German leaders meeting.