PARIS -- Under mounting pressure from nervous financial markets, the leaders of France and Germany reached a difficult compromise Monday to seek mandatory limits on budget deficits among debt-laden European governments.

The plan, which requires rewriting a major European Union treaty, is designed to end the leading cause of doubt about European financial health and respond to questions about whether the EU's common currency, the euro, can endure. If adopted by other EU nations, the deal would mean drastic cuts in European budgets. It would also end three decades of overspending that helped finance a cozy social protection system envied by much of the world.

Underlining the high stakes, Standard & Poor's announced that 15 nations using the euro are being placed on a credit watch, risking a downgrade in their creditworthiness rating because of failure to rein in the crisis. The rating agency made the decision despite the accord Monday, signaling doubt the measures will be implemented fast enough to calm fears about heavy government debt.

Although France and Germany represent the core of the EU, it is far from certain that the rest of the group's 27 nations will go along at a crucial European summit scheduled for Thursday in Brussels, Belgium. The deal could face significant opposition from those reluctant to surrender national sovereignty over fiscal policy.

The proposed rules, a hard-fought compromise between French President Nicolas Sarkozy and German Chancellor Angela Merkel, would be part of a renegotiated EU treaty that would be completed by mid-March and ratified within two months, the two leaders said. The attempt to impose a tight timetable was designed to show financial markets that Europe is serious about bringing its debt problem under control.

The plan will be outlined in a letter to EU leaders Wednesday and voted on at the summit the next day. Sarkozy said the hope is that all EU nations will adhere to the plan, but he said it could move forward with OKs from the 17 that adopted the euro.