Italy’s technocratic leader Mario Monti is warning of dramatic consequences should leaders at next week’s EU summit fail to find concrete solutions to save the euro and prevent contagion.

He told reporters in Rome on Thursday (21 June) that the doomsday scenario at the EU summit would invariably lead to higher borrowing costs on all EU countries.

“There would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries,” he said.

An EU summit stalemate would risk turning Italians even more against the EU, he noted, with his government pushing through unpopular labour reforms, tax hikes and pension cuts.

Monti is also calling for a fuller banking union, a European deposit guarantee, and “new market-friendly policy mechanisms” to help struggling countries.

The mechanism would apply to countries who “respect the rules on public finance and structural reforms”. Monti did not disclose the full details of his plan but said he favours the purchase of bonds of countries under attack, reports the Guardian.

Italy, whose borrowing costs are soaring, had earlier floated the idea of using the €440bn eurozone bailout fund to buy bonds on the market. German Chancellor Angela Merkel had however quickly shot down the idea.

“There must be something wrong if a country that complies still has such high interest rates,” Monti told the Guardian.

Meanwhile, Italy’s ten-year bonds hit six percent and are rising. Analysts predict Italy’s weak exports may also stifle any kind of significant growth for at least another year. The country is also burdened by €2 trillion in public debt.

Monti is hoping to secure a preliminary deal with German Chancellor Angela Merkel, French president Francois Hollande, and Spain's prime minister Mariano Rajoy. All three are meeting him in Rome on Friday evening (22 June) to figure out how to achieve a fiscal and banking union in the euro zone.

Spain, reports Reuters, may also use the occasion to formally request for a €100 billion following revelations on Thursday that its banking sector needs €62 billion in extra capital.

Over a dozen European banks have also been hit by another downgrade by credit rating agency Moodys. Some 15 banks and financial institutions, including Germany’s Deutsche Bank, had their ratings cut on Thursday.

“All of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” Moody’s global banking managing director Greg Bauer said in the agency’s statement.

Credit Suisse had its rating cut by three notches. Ratings for four of the banks were cut by one notch and another ten by two. Credit Suisse's chief financial officer, David Mathers, told Reuters that Moody’s still recognises the bank as highly rated despite the three notch drop.

The downgrades come on the heels of a Europe that is progressively sliding into a recession.