MercoPress. South Atlantic News Agency

Merkel insists EU must seal a pact to tighten fiscal rules

The German Chancellor addressing a political rally

Ratings downgrades in the Euro zone by S&P underline why Europe must seal a pact to tighten fiscal rules quickly and get its permanent bailout fund up and running as soon as possible, German Chancellor Angela Merkel said on Saturday.

“We are now challenged to implement the fiscal compact even quicker ... and to do it resolutely, not to try to soften it,” she said at a meeting of conservatives in the northern city of Kiel.

“We will also work particularly to implement the permanent stability mechanism, the ESM, so soon as possible -- this is important regarding investor trust.”

Standard & Poor's on Friday downgraded the credit ratings of nine out of 17 Euro zone countries including France, Italy and Spain. Germany kept its AAA rating, while France and Austria lost theirs.

The S&P move was not a surprise, Merkel said.

“It is one of three ratings agencies,” she added. “We have taken it into account. It did not surprise us completely, given the discussion in the past weeks.”

Turning to Europe's current bailout fund, the EFSF, Merkel said that the downgrade should not affect its operation.

“The necessary tasks that the EFSF must fulfil in the coming months, I very much believe, can be fulfilled with the current methods.”

”The interest rates for the acceptance of certain bonds had already risen a bit anyway -- the work of the EFSF will not be torpedoed. I see no need to change anything regarding the EFSF”, concluded Merkel.