The Euro Fell By &Nbsp; The European Situation Worsened.

It is increasingly believed that France is preparing for its AAA rating to be downgraded.

After the EU summit last week, Standard & Poor (s) had claimed that it would be in the euro zone.

Some observers believe that the words of French Foreign Minister Juppe (Alain Jupp) are preparing for downgrading.

He believes that downgrading will not have a big impact.

Juppe told the French newspaper Les Echos on Tuesday that downgrading is certainly not good news, but it will not have disastrous consequences.

The impact of the European crisis on Asia, a French official said, has not yet received a notice from the S & P downgrading.

But the official insisted that investors had no reason to question France's solvency.

Standard and poor's will notify the relevant government 12 hours ahead of schedule before changing the rating.

Steven Englander, head of foreign exchange strategy at Citigroup's ten largest industrial country in New York (G10), said that judging from the rhetoric of some senior executives, the rating downgrades seem to be a foregone conclusion.

He said that not only is France's rating likely to be downgraded, but other AAA rating countries such as Austria may also be downgraded.

It feels like they are doing anticipate management, "he said.

In the UK, financial regulators are discussing with banks whether they have prepared for the possible break-up of the eurozone, people familiar with the matter said.

These people say that the Financial Services Authority has been talking with the risk managers of major British banks and international banks to better understand their contingency planning.

The regulator has asked banks to submit detailed reports if the eurozone disintegrates or member states resume their original country.

Meanwhile, German Chancellor Merkel (Angela Merkel) reiterated his position that the issuance of eurozone common bonds could not solve the crisis.

She also expressed opposition to raising the upper limit of 500 billion euros ($651 billion 200 million) of the euro zone rescue fund.

Merkel's position played a decisive role in Europe's response to the crisis.

She said in the German parliament that eurozone bonds are not suitable for rescue measures.

Italy's new prime minister, Mario Monti, told the Senate that Germany had believed that the EU summit last week dragged on Friday morning was enough to appease the financial markets.

The Monti administration will hold a vote of confidence on Thursday's 20 billion euro tightening plan.

Monti's plan is to prevent Italy from being hit by the euro zone debt crisis.

He said there should be further agreements to resolve the crisis, including the issuance of joint bonds by eurozone members.

The EU summit, which will be held in March next year, may put the matter on the agenda.

In the Italy Senate, Monti said that the Italy government strongly insisted on Issuing eurozone bonds. This is not a backdoor for condoning fiscal discipline and slack countries. It will indeed boost economic growth.

He also said that issuing bonds with joint guarantees would further deepen the pool of European capital markets.

Merkel said that the road to financial integration is advancing, but the overcoming of crises may take years.

Many people in Europe still hold a glimmer of hope that the European Central Bank will intervene more vigorously and lower the borrowing costs of troubled governments by buying bonds.

But Wiedemann, President of the Bundesbank and Jens Weidmann, imply that his opposition has not softened.

Wiedemann said that the idea of letting the ECB print money to help part of the debt financing euro zone countries should be put down forever.

He said that when the monetary policy is tied up with the fiscal policy of the floats, the central bank will lose its independence and then lose control of prices.

The cost of borrowing from the troubled financial sector is still rising. Italy's auctions of five - year bonds have reached the highest level of 6.47% since the euro era.

By comparison, Germany's borrowing interest rate for two years is only 0.29%, which reflects the gap between the eurozone members.

For the first time in 11 months, the euro has fallen below the level of 1 euro to 1.30 US dollars, which has remained below this level for the rest of the European trading day.

Mather, head of international bond investment management at Pacific Investment Management Co., said that the euro could fall to 1 euro to 1 U.S. dollars in 2012.

He said in a telephone interview on Wednesday that it is not impossible to achieve the exchange rate of 1 to 1 next year; I am now more empty than the euro three months ago.

Pacific Investment management company manages more than $1 trillion in assets worldwide.

European stock markets also fell.

Paris stock market fell 3.3%, Frankfurt fell 1.7%, London fell 2.3%.

Reflecting the pressure of European banks, the cost of borrowing for the three month dollar in the London Interbank Market increased steadily on Wednesday.

The cost of borrowing dollars in these markets is now higher than the first outbreak of the European debt crisis in the summer of 2010 in Greece.

As the European debt crisis reached alarming heights before the summit, it reflected another indicator of the US dollar demand in European banks. The March cross-currency basis swap has also started to rise again, approaching the level that has not been seen since November.

Meanwhile, European banks are still in urgent need of the US dollar.

On Wednesday, their demand for the seven day dollar financing of the European Central Bank rose sharply.

The European Central Bank said that it has allocated $5 billion 122 million for the seven day fixed rate US dollar swap operation, which is substantially larger than last week's $1 billion 602 million allocation.

But European banks have not borrowed money from each other, but instead have left a large proportion of their cash in the European Central Bank.