According to a draft joint statement, European leaders are slated to agree in principle on Friday to push for a free-trade pact with the United States, putting the onus on the White House to respond towards a proposal that would integrate nearly half of the world's economic output.

Key exporters and European heavyweights Germany and Britain appear poised to have secured support and approval from the rest of the European Union at a summit in Brussels to strike a deal with Washington, which many leaders hope serve as a panacea to Europe, rescuing it from multiple banking and debt crises. According to the draft of the final summit statement obtained by Reuters, the European Union will give "its support for a comprehensive trade agreement" with the United States. In addition, "All efforts should be devoted to pursuing agreements with key partners," EU leaders will say, putting the United States at the top of a long list, which also includes Japan and Canada.

Indeed, the EU leaders' statement fosters heightened expectations that U.S. President Barack Obama could endorse the initiative as early as next Tuesday in his annual State of the Union speech, which presidents have traditionally used as a forum to lay out their priorities and ambitions for the year.

President Obama and EU leaders assigned their trade chiefs back in 2011 to look at whether it was feasible to agree a deal to further integrate the two blocs that already institute low tariffs and boundaries. As such, a joint U.S.-EU draft proposal drawn up by EU Trade Commissioner Karel De Gucht and U.S. Trade Representative Ron Kirk is in the final stages of completion, assuring a smooth delivery. De Gucht, who went to Washington this week, has given strong signals that there is enough common ground to proceed forth with the negotiations that have gone smoothly thus far.

Talks could start in months, and though such negotiations are infamously slow and drawn out, both sides appear poised to agree on a symbiotic accord quickly, possibly by the end of 2014. However U.S. officials, already wary of becoming entrenched in endless debates and talks, have said they need a strong political commitment from the 27-country European Union that Brussels is truly committed to opening up its markets before they can proceed ahead with talks.

The EU's formal commitment will be delivered today when the summit, largely focused on efforts to agree the EU's seven-year budget, wraps up with a final statement. German Chancellor Angela Merkel, with support from free-trade advocate Britain, has been vying for a deal for months. "I wish for nothing more than a free-trade agreement with the United States," Merkel said on January 29 in Berlin. According to several diplomats, the time is right for a deal that was first talked about three decades ago, however it was initially considered too difficult because of worries from protectionists on both sides of the Atlantic, especially the farming sector.

In a speech on Saturday in Munich, U.S. Vice President Joe Biden said the economic benefits of a comprehensive trade agreement would be "almost boundless" if the two sides could muster the political will to resolve longstanding differences in regulations that have blocked farm and other exports – "This is within our reach."

Wall Street eyes Moody’s following S&P lawsuit

The US Justice Department’s decision to sue Standard & Poor’s has left investors pondering why Moody’s Investors Service and Fitch Ratings weren’t targeted for awarding the same top grades towards troubled mortgage bonds and other debt securities. “What purpose does it serve for the U.S. government to bring an action against S&P at this point in time? “At first glance, is this a bid for some sort of retribution for the company’s 2011 downgrade of the U.S.? Moody’s and Fitch assigned the same ratings to these transactions. Why aren’t they named as well?” wrote Bonnie Baha, the Head of Global developed credit at DoubleLine Capital LP, which oversees about $53 billion.

Indeed, the Financial Crisis Inquiry Commission and a Senate panel placed the blame squarely on S&P, Moody’s and Fitch for inflated ratings on mortgage-backed securities and collateralized debt obligations that facilitated the worst US financial crisis since the Great Depression. Together, the agencies have combined to provide nearly 96% of all ratings for governments and companies in the $42 trillion debt market in 2011. The U.S., in a lawsuit filed February 4 in federal court in Los Angeles, is alleging that the unit of New York-based McGraw-Hill Cos. defrauded investors by failing to adjust its analytical models or taking necessary steps to accurately reflect the risks of the securities because it was afraid of losing business.

Looking back, S&P lowered the U.S. government’s credit rating one step to AA+ from the top AAA rank on Aug. 5, 2011, after months of back and forth negotiations between President Barack Obama and Congressional Republicans over whether to raise the federal debt limit. Bond investors in particular repudiated the downgrade and U.S. borrowing costs fell to record lows as Treasuries rallied the most since 2008.

“It is true that debt markets have judged ratings company rankings to be unimportant”, Baha said. However, “my question is, why are U.S. taxpayers wasting money to prove a fact that’s already widely accepted in the market?” The Justice Department’s case “looks rather suspicious because Moody’s isn’t involved.” said Peter Wallison, co-director of the Washington-based American Enterprise Institute’s program on financial policy. “It’s very hard to see how Moody’s was doing anything differently than S&P,” he added yesterday.

Conversely, the S&P has not stood idle in its defense – Floyd Abrams, the Cahill Gordon & Reindel LLP lawyer representing the company, noted in a February 5 appearance on Bloomberg Television that investors required two ratings on CDOs before they would buy. “And yet we find ourselves now being accused of acting in bad faith, while everyone else acted in good faith, presumably.” He said on CNBC the same day that the Justice Department’s investigation intensified after the S&P downgrade, though he didn’t know if there was a direct link. “No one in the government has come to me and said, ‘That’s why we did it,’” Abrams said.

Ed Sweeney, an S&P spokesman, declined to elaborate on Abrams’s comments. Attorney General Eric Holder said February 5 in Washington that the complaint against S&P was seemingly unrelated to the downgrade. “There’s no connection between the two,” he said. “They did what they did, assessing what the creditworthiness was of this nation. We looked at the facts, the law and the investigation” and “made a determination that the filing of these lawsuits was appropriate.”