German Chancellor Angela Merkel said Standard and Poor's downgrades of nine countries underline the fact that the eurozone faces a “long road” to win back investors' confidence, pushing Saturday for it to move quickly on a new budget discipline pact and a permanent rescue fund. Germany kept its AAA rating but S&P stripped France, with which it has co-piloted the eurozone rescue drive, of its top-notch rating — fueling concerns that that in turn could complicate Europe's efforts to keep its weaker economies afloat. Merkel said that she had “taken note” of the decision by S&P, which she stressed repeatedly is only one of three major rating agencies. “The decision confirms my conviction that we in Europe still have a long road ahead of us before the confidence of investors is restored,” she said at a televised news conference in the north German city of Kiel, where her conservative party's leadership was meeting. “But I think it can be seen that we have set off with determination along this road (to) a stable currency, solid finances and sustainable growth,” she added. Merkel stressed the importance of a new treaty enshrining tougher fiscal rules, for which Germany has pushed hard. Most European Union leaders agreed in early December to draw up the pact, and Merkel has said the pact could be signed as early as the end of this month, and at the beginning of March at the latest. “We are now called upon ... to implement quickly the fiscal pact and implement it decisively — without trying to water it down everywhere,” Merkel said. The chancellor sought to allay concerns that the downgrade of France, the 17-nation eurozone's No. 2 economy after Germany, would complicate the work of the bloc's temporary rescue fund, the €440 billion ($560 billion) European Financial Stability Facility. However, she did underline the urgency of putting its permanent successor, the European Stability Mechanism, in place quickly. European leaders already have decided to get it up up and running in July, a year ahead of the original schedule; Merkel and French President Nicolas Sarkozy said on Monday that they would consider speeding up payments into the ESM. The downgrades “won't torpedo the work of the EFSF now — I see no need to change anything about the EFSF now,” she said. “I am firmly convinced that the EFSF can fulfill the needs it still has to fulfill in the coming months with the existing methods.” She added that “we will work to implement as quickly as possible the ESM — that is also important for investors' confidence.” The ESM will be able to lend €500 billion. In contrast to the EFSF, it will have paid-in capital from euro countries, similar to a bank, which makes it less vulnerable to downgrades of its contributing states.. Merkel said Europe needs the new fund, “which is underlaid by capital and will be independent from such (ratings) evaluations.” As for the current temporary fund, she suggested that its top rating isn't so important — “from the beginning, I wasn't of the opinion that the EFSF absolutely has to be triple-A.”
