By Simon Morgan

FRANKFURT, Jul 24, 2012 (AFP) - The European Central Bank may have to ride to the eurozone's rescue again very soon, analysts said Tuesday, as Spain looks set to be the next country sucked down by the never-ending debt crisis.

"Without substantial ECB action, the eurozone may soon lose the ability to control the market panic," Berenberg Bank economist Christian Schulz wrote in a note to investors.

Spanish borrowing costs have soared to dangerously high levels and bailed-out Greece's rescue programme appears to be on the rocks just as the the sovereign debt crisis took another turn when ratings agency Moody's warned it could strip euro kingpin Germany of its coveted triple-A rating.

Moody's argued that Germany -- Europe's biggest economy which has fared relatively well since the start of the crisis -- faces increasingly incalculable risks in a possible Greek exit from the eurozone and soaring costs of potential bailouts for Spain and Italy.

After Greece, Ireland and Portugal were all compelled to seek aid from their European partners, the single currency area's woes are showing no signs of abating, with Spain expected to be the next domino to fall.

Schulz at Berenberg Bank said Moody's action laid bare "the limits of Europe's current strategy" and the ECB, the only player currently capable of acting fast enough, will need to don its fire-fighting helmet once again.

With the eurozone's public debt and deficit levels well below those of the United States and Japan, Europe has less of a debt problem than a confidence crisis, the analyst said.

And that was "largely because of the reluctance of its central bank to intervene forcefully in market panics. Moody's rating action may bring the end to this reluctance a little closer," Schulz argued.

Right from the start of the crisis, the ECB has not hesitated to launch a series of emergency measures.

The central bank quickly reversed last year's rate hikes and earlier this month cut eurozone borrowing costs to an all-time low of 0.75 percent.

It embarked on a hotly contested programme of buying up the bonds of debt-mired countries, known as the Securities Markets Programme or SMP.

And in two long-term refinancing operations (LTROs) in December and February, it pumped more than 1.0 trillion euros ($1.2 trillion) into the banking system in a bid to avert a dangerous credit squeeze in the 17 countries that share the euro.

ECB officials have never ceased to repeat that such measures are only temporary and merely meant to buy time for governments to tackle the root causes of the crisis -- profligate spending.

The SMP programme, for one, has lain virtually dormant since February and there were no signs of the ECB reviving it as recently as last week.

But ECB chief Mario Draghi, in an interview with Le Monde at the weekend, said: "We are very open. We have no taboos."

The central bank's governing council is scheduled to hold its next policy meeting on August 2.

The quarter-point rate cut at its last meeting was seen by many as too timid, especially as the bank announced no new emergency measures, so markets are waiting to see what Draghi might deliver next week.

A report by the INET Institute for New Economic Thinking, a group of 17 leading economists who make up the "Council of the Euro Zone Crisis," called on the ECB to act.

"The ECB must use all tools (conventional and non-conventional) to ensure a more homogeneous transmission of monetary policy," the economists wrote.

As the International Monetary Fund has suggested, "monetary policy should be accommodative during this emergency period, using both conventional and non-conventional policies to support" economic growth and facilitate the real exchange rate adjustments needed, they said.

Given that the current woes of Spain and Italy were "self-fulfilling fiscal crises, we believe that the ECB could and should be committing to much larger interventions in the market."

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