S&P heaps more pressure on Eurozone

Ratings agency Standard & Poor's put more pressure on the Eurozone, with its chief economist saying time was running out for the currency bloc to resolve its debt problems and that it might need another financial shock to get it moving.

Jean-Michel Six, chief economist of the agency that shocked financial markets last week by putting 15 Eurozone countries on a watch for a potential downgrade, said last week's EU summit agreement was a significant step forward, but not enough.

S&P usually takes around three months to act after a warning, but has said that in this case it may do so more quickly.

"There is probably yet another shock required before everybody in the euro zone reads from the same page, for instance a major German bank experiencing some real difficulties on the markets, which is a genuine possibility in the near term," Six told a business conference in Tel Aviv.

"Then there would be a recognition that everybody is indeed on the same boat and that even German institutions can be affected by this contagion. I'm afraid this may still be required."

Twenty-six EU countries - all, minus Britain - agreed on Friday to go forward with further and deeper economic integration.

But the outcome has left financial markets uncertain whether and when more decisive action would be taken to stem the debt crisis, which began in Greece, spread to Portugal, Ireland, Italy and Spain and now threatens France and even economic powerhouse Germany.

Six said the summit had made progress "in terms of getting the governments mentally ready to commit in writing in some constitutional format to a medium-term fiscal strategy which would allow the ECB to become what it is not at the moment, at least officially, a lender of last resort."

Many market analysts believe that having the European Central Bank act as a lender of last resort, effectively bailing out countries that get in trouble, would solve the confidence issue facing the euro zone.

But leading power Germany is opposed, fearing the impact on member states' fiscal discipline.