French President Nicolas Sarkozy has warned Europe faces an "unprecedented crisis" but urged calm in the face of Standard & Poor's multiple eurozone rating downgrades.
Sarkozy issued the warning in Madrid where he was the first foreign leader to meet with Spain's new conservative prime minister, Mariano Rajoy, since he was sworn in on December 21.
"We are confronted by an unprecedented crisis that forces us to cut spending, lower our deficits but also to find the path to new growth by resolving our competitiveness problems," Sarkozy said on Monday.
Standard & Poor's cut the credit rating of nine debt-laden European countries Friday, including stripping France of its top-notch AAA rating and slashing Spain by two notches to A from AA-minus.
Moody's Investors Service soothed some of the pain on Monday, confirming France's AAA rating while continuing to review whether it will maintain its "stable" outlook.
"Fundamentally it changes nothing," Sarkozy said.
"We have to reduce our deficits, cut spending, improve our countries' competitiveness to rediscover growth," he said, calling on people "not to panic" and to "react to these decisions by keeping our cool".
"I don't plan to take into account what this or that person says," the French leader said, nevertheless describing the agencies' ratings as "interesting elements".
Spain's leader, holding his first news conference since he took power, agreed.
"In the end, the most decisive thing is that each country follow its own path," Rajoy said.
The new right-leaning Spanish government has announced 8.9 billion euros ($A10.9 billion) in budget cuts, tax increases to bring in 6.28 billion euros and an anti-tax fraud battle to recoup another 8.17 billion euros.
Rajoy said at the weekend that Spain, which declared a towering 21.5 per cent unemployment rate in the third quarter of 2011, now had an "astronomical" figure of 5.4 million jobless.
The Spanish leader gave his support to the French-backed scheme to impose a tax on financial transactions.
"Spain will support this tax," Rajoy said after the talks with Sarkozy, who was in Spain to be awarded the Order of the Golden Fleece for helping Spain in its fight against armed Basque separatist group ETA.
