The downgrading of France was meant as a warning. But as the Greek crisis enters a critical phase, and Athens looks to its partners for more cash, Europe may find that Sarkozy's patience has now all but run out

Nicolas Sarkozy has spent the weekend nursing his hurt pride after Standard & Poor's stripped France of its AAA rating in a late-night announcement on Friday. But this week, Greece will once again be at the eye of the eurozone storm, as inspectors from the so-called "troika" – the European commission, the International Monetary Fund and the European Central Bank – arrive to decide whether Athens still deserves the €130bn (£107bn) bailout it was first promised last October.

And after Friday's mass downgrade, which underscored the fact that investors believe governments right across the 17-member single currency area will be on the hook if the crisis deteriorates, Greece's eurozone partners may no longer be in any mood to compromise.

Since the high political drama of December's all-night Brussels summit, when David Cameron wielded Britain's veto and put the kibosh on a new eurozone treaty, there had been a few weeks of eerie calm. Under the leadership of Mario Draghi, the ECB made half a trillion euros' worth of cheap loans available to cash-strapped banks in a bid to unblock the frozen credit markets and prevent the financial sector collapsing. At the same time, the ECB waded into bond markets to buy billions of euros of Italian and Spanish debt to help bring down their borrowing costs.

Together with a concerted bid by Rome's new "technocratic" government to convince the markets and its eurozone partners that it means business about reducing Italy's debt, the ECB's approach appeared to have paid dividends. The first few events in this year's packed calendar of debt auctions, at which governments need to raise billions of euros over the coming months, went off quietly, at lower borrowing costs.

But this brief hiatus came to a dramatic end on Friday. First, talks in Athens aimed at persuading Greece's creditors to voluntarily accept a writedown on what they are owed stalled, amid rumours that hedge funds – which have insured themselves against the risk of collapse with credit default swaps, and therefore will get a payout in any event – are refusing to join in.

While the markets were still digesting the news of the standoff in Athens, rumours began to emerge that Standard & Poor's was poised to take the axe to the ratings of a string of eurozone countries, including even France. S&P had warned late in 2011, in the runup to the fateful Brussels summit, that it was re-examining most eurozone countries' ratings because it was concerned about their exposure to the sovereign debt crisis and unconvinced by politicians' response.

Then, after the European markets had closed, S&P confirmed that it was, indeed, stripping France of its coveted AAA rating and downgrading another eight countries, from bailed-out Portugal to the island of Malta. Across the eurozone, only Germany, the Netherlands, Finland and Luxembourg now retain S&P's top rating.

The downgrades deal a heavy blow to the pride of political leaders, not least Sarkozy, who had hoped to show his electorate that he had insulated them from the crisis, before the French elections later this year. But they will also make it harder to build a financial firewall around Greece.

The €440bn European financial stability facility (EFSF), the single currency's bailout fund, is only as strong as the governments underwriting it, and its own AAA rating now looks under serious threat. That will make it far more difficult for Europe's governments to persuade overseas investors, such as China and Brazil, to put their own money at risk by subscribing to the EFSF, as was envisaged.

"This will make the task of leveraging the EFSF, to the extent that was still feasible, even harder," says Sony Kapoor of Brussels-based thinktank Re-Define.

Baroness Vadera, the former G20 adviser who now consults on the eurozone crisis, said recently: "It was always a nonsense for leaders to suggest that the EFSF could be leveraged four to five times, so we are exactly where we have been for a long time: that for Italy and Spain, the ECB, with a little help from the IMF, remains their only backup on liquidity."

Europe's banks, which are heavily exposed to eurozone bonds, are in turn likely to face a fresh wave of downgrades as a result of S&P's actions. Bond yields – in effect, the interest rate charged to national governments when they borrow – could rise as a result of the ratings cuts, as investors pile out of the debts of the countries affected, especially those that have been downgraded to junk status (although, as Kapoor points out, "it is not as if investors can flee the largest sovereign debt market in the world, the euro area, en masse").

But there is also a risk that by bringing the impact of the crisis on the eurozone's Mediterranean fringe right to the door of the Élysée palace, the downgrade could harden the attitude of the French government in what could be a critical few weeks. "Sarkozy's in an election year. He has to make a decision which way to jump," says Simon Derrick of Bank of New York Mellon. "He has to be seen to be doing something to restore the AAA rating, and the last thing he wants to be doing is giving more money to Greece."

Negotiations with Greece's bondholders had been expected to continue through the weekend. Athens has repeatedly warned that time is running out and that a deal with its creditors is an essential part of collecting the second tranche of bailout cash it needs to avoid defaulting within weeks.

But after talks stalled on Friday, the Institute for International Finance – the shadowy Washington body that is negotiating on behalf of the banks – said in a statement that it was time for a "pause for reflection on the benefits of a voluntary approach". Rumours have been swirling for several days that Greek prime minister Lucas Papademos, exasperated by the approach of investors, is considering passing a law to force them to accept a loss.

Derrick says the collapse of the negotiations implies that a large number of investors are refusing to play ball. "It suggests there's a really significant holdout". And Vadera believes it was always a mistake to insist that any writedown had to be voluntary: "To make Greece's debt sustainable, it needs a depth of writedown that was never really possible on a voluntary basis. That is what the negotiation is finally facing up to."

Nick Dearden, of the Jubilee Debt Campaign, which was founded to fight unsustainable debts in the world's poorest countries, said the hard-nosed behaviour of hedge funds and other so-called "vulture" investors – some of whom bought Greek debt long after it became clear that the country was in difficulty – was exacerbating the pain. "The Greek economy has been destroyed and it is shocking to see the vultures diving in for the remaining pickings. It is imperative for the whole world that Greece and other debt-laden countries demand and receive broad debt cancellation, combined with strict regulations on the activities of vultures."

Vulture funds are investors that specialise in buying up the bonds of distressed governments at far below their face value, and then pursuing them to get the full value of the debt repaid. They are often the last bondholders to agree to proposals for restructuring, even when a deal has been agreed by other creditors; Dearden suggests this is the approach currently being taken by some of the investors in Greece.

Time is running out in Athens. Few analysts now believe the 50% downgrade on the value of its bonds envisaged in the negotiations will be enough, even if it can be agreed – and there have also been reports that the IMF believes Greece will need a larger bailout even than the €130bn it has been promised.

Unless the money is released, the Greek government has made it clear that it is hurtling towards "the immediate risk of a disorderly default" as soon as March, when €14.5bn worth of bonds are due to be repaid.

At the height of the crisis over the threatened Greek referendum, when George Papandreou was forced out of power, Sarkozy said it had been a mistake to admit Greece to the eurozone. His attitude, and that of governments across the rest of the zone, will now be critical in determining whether Greece becomes the first member to crash out of the single currency.