The choice follows a downgrade by S&P on Friday of France and Austria's credit rating by one notch to AA+, which reduced the number of AAA rated countries guaranteeing the issuance of the European Financial Stability Facility (EFSF) to four.

The EFSF has an effective lending capacity of 440 billion euros thanks to guarantees from euro zone governments.

Because only six of the 17 countries sharing the euro had the highest AAA rating when the EFSF was set up, rating agencies demanded that the guarantees be much higher than the EFSF's actual lending power and equal 780 billion euros.

The loss of S&P's top rating by France and Austria means that without any changes, the EFSF's lending capacity will fall by 180 billion euros - the share of guarantees by Vienna and Paris for the fund, the senior official said.

Since the EFSF has now committed 43.7 billion euros to a financing programme for Ireland and Portugal, the loss of 180 billion would leave it 216.3 billion to finance a second programme for Greece and any other future euro zone needs.

Euro zone countries can also decide that a downgrade by just one of three major rating agencies is not a reason for great concern because the EFSF still has top ratings from the other two - Moody's and Fitch, euro zone officials said.

But euro zone finance ministers said in a statement on Friday they were determined to "explore the options for maintaining the EFSF's AAA rating".

"If there is a decision by EFSF shareholders (euro zone countries) to keep the AAA rating for the EFSF it could be done in two ways," the senior euro zone official with insight into EFSF said.

The first one would entail changes to the EFSF framework agreement to increase the amount of guarantees from the remaining four AAA countries - Germany, the Netherlands, Finland and Luxembourg - to compensate for Austria and France.

Such changes would have to be approved by parliaments in these countries, which would be highly problematic given public opposition in Germany and Finland.

"Definitely we can anticipate that this would be politically the most difficult choice," the official said.

The second option would be to increase the cash buffer the EFSF keeps from interest on the loans it makes and allow the lending capacity to fall by 180 billion, the official said.

But the impact of the S&P downgrade of several euro zone countries on Friday on the EFSF's operations and its relations with investors was likely to be limited, the official said.

"What is important, is that there are still two rating agencies which keep the EFSF at AAA and for investors that is what will matter," the official said, as many investors now relied more on internal ratings rather than external ones.

The official also said the lower ratings of most EFSF guarantors were unlikely to directly affect its ability for leverage.

The EFSF can, for example, seek to attract private or public investors to buy euro zone bonds alongside the EFSF, in a co-investment fund the first losses of which would be borne by the EFSF.

"The EFSF would fund its own junior tranche in the co-investment fund from the start, so there is no dependence on any rating of the EFSF - I don't think the rating would have a strong impact on the instrument," the official said.

The EFSF will auction 1.5 billion euros worth of six-month bills in the coming week, but the official did not expect the auction to run into any problems because it was short-term paper.

(Reporting by Jan Strupczewski; Editing by Dale Hudson)

• A Permanent Economic Emergency