The European Central Bank took centre stage in the battle to save the euro on Thursday after new ratings warnings ramped up the pressure on EU leaders to agree budget discipline at a summit later.
The ECB's governing council gathered in Frankfurt just hours before European Union leaders flew to Brussels in what is widely seen as the last chance to prevent the eurozone from breaking up and threatening the entire EU.
A collapse of the single currency would send violent shock waves reverberating through the global economy.
"The entire world is watching. We must do everything" to save the euro, European Commission chief Jose Manuel Barroso told reporters in the French port city of Marseille.
The ECB is widely expected to cut its key interest rate at its meeting in view of a looming economic downturn, and markets were nervously waiting to see what other action the central bank -- which many see as the only body able to contain the crisis -- would take to shore up the euro.
For the markets, the crucial question was whether the ECB will see view commitments by Germany and France to tighten up eurozone budget discipline as sufficiently convincing to give it extra room for manoeuvre.
With investors undecided about what to expect from the summit, European stocks were higher, while the euro dipped against the dollar in early trading.
The announcement by international credit rating agency Standard & Poor's that it is placing entire 27-nation bloc on downgrade watch, just days after similar moves for eurozone countries and their EFSF bailout fund, has turned up the pressure to breaking point.
"The situation is serious... the euro can explode and Europe unravel", France's minister for European affairs Jean Leonetti told French Canal Plus television.
The ECB has played fire-fighter to a substantial extent throughout the long and debilitating crisis. But its officials, including its new chief Mario Draghi, insist that such a role is only temporary and it is ultimately up to governments to get their finances in order.
There is widespread pressure for the ECB to turn back the crisis by simply printing enough money to buy up a large part of the mountain of debt that many eurozone countries have amassed.
But the bank, strongly backed by Germany, is vehemently opposed to this, which it argues runs against the very rules that the eurozone, and the wider EU, is built on.
Among the so-called "unconventional" measures" the ECB has taken so far to contain the crisis, the central bank has been keeping the region's banks flush with liquidity or cash.
It has also, albeit reluctantly, been buying up the sovereign bonds of countries finding it difficult to drum up financing the usual way via the markets.
Crucially, in comments to the European Parliament last week, ECB chief Draghi signalled flexibility to go beyond those measures, but only if governments credibly removed the threat of moral hazard, meaning obtaining a free ride, for non-compliant countries.
Analysts were sceptical, however, whether the ECB would deliver so shortly before the EU summit.
"Hints from ECB president Draghi in this regard are unlikely just hours before the EU government leaders commence the crucial summit. But watch out for signals from the ECB over the weekend if tighter fiscal rules were to be agreed," said Commerzbank analyst Rainer Guntermann.
The summit itself looks set to be the toughest yet, with Germany playing down hopes that it will save the euro and French President Nicolas Sarkozy warning the risk of a eurozone "explosion" was still very real.
For high-ranking officials and diplomats, the two biggest obstacles are Germany's refusal to embark on anything short of treaty changes, while Britain is refusing to back changes Berlin's proposed changes unless it secures important concessions for its financial services.
Eurogroup chief Jean-Claude Juncker was flatly opposed to such demands.
The situation is veering from serious towards desperate, so much so that US President Barack Obama held urgent telephone talks late on Wednesday with German Chancellor Angela Merkel.
Already, Obama had despatched his treasury secretary Timothy Geithner to Europe for talks with key players that will continue on Thursday in Marseille, France, where EU conservative allies are meeting for pre-summit negotiating strategy talks.