15 Jan 2012

EZ still has long way to go - Merkel

6:32 am on 15 January 2012

Chancellor Angela Merkel of Germany says the downgrades of nine eurozone nations by Standard Poor's on Friday means the eurozone still has a long way to go to win back confidence.

We are now called upon to implement quickly the fiscal pact, to implement it with determination and not try to again soften it, she said in Kiel in northern Germany.

Mrs Merkel also said that Europe's permanent bailout fund must be effective as soon as possible.

The European Stability Mechanism is due to take effect in July 2012 with funding of 500 billion euros. In its current form, the fund has a lending capacity of 440 billion euros.

Finance Minister Wolfgang Schaeuble also sought to play down the ratings downgrade of France and Austria and warned against overestimating its impact.

Standard Poor's said Europe's austerity and budget discipline alone were not sufficient to fight the debt crisis and may become self-defeating.

On Friday, SP said France was being downgraded one notch, to AA+. France still has a top AAA rating from the other two main ratings agencies, Moody's and Fitch.

SP also said Italy, Spain, Cyprus and Portugal were cut two notches, with the latter two given junk ratings. Germany kept its AAA rating.

Austria, Slovakia, Slovenia and Malta were the other countries downgraded.