(Updates with details, quotes, background)
By Michele Sinner
LUXEMBOURG, Jan 30 (Reuters) - The European Central Bank has room to cut interest rates further as inflation sinks and the euro zone economy contracts, the chairman of the currency bloc's finance ministers, Jean-Claude Juncker, said on Friday.
But tens of billions of euros promised by governments in fiscal stimuli will do little to fight the worst economic downturn in decades unless financial markets are fixed so credit can flow, he told reporters.
"I am of the opinion as the ECB and (ECB President) Jean-Claude Trichet have said themselves that the ECB still has scope for reductions, but I understand those who say that they are against moving towards a zero rate," he said.
Asked whether he thought the ECB would lower rates in March as widely expected or in February, Juncker said: "This bank has in a surprisingly quick rhythm reduced rates from 4.5 percent to 2 percent."
He said data earlier on Friday showing euro zone annual inflation falling to 1.1 percent in January from 1.6 percent in December should make the ECB less worried about price growth.
Views on future rate moves were not uniform at the ECB, Juncker added.
"Some members of the Governing Council have let it be known in recent statements that they see some scope to reduce rates, while others including Mr Mersch (Luxembourg central bank governor Yves Mersch) warned against a rate policy that would lead near the zero zone (for interest rates)," he said.
The ECB wants to keep inflation below, but close to, 2 percent and several members of its rate-setting council have expressed concern that inflation should not fall too far below the target. They have dismissed, however, any risk of deflation.
Having cut rates by a total of 225 basis points since October to 2.0 percent, the bank has signalled it will pause in February and consider further cuts in March.
Juncker said governments should take measures to convince risk-fearing financial markets to lend more. Otherwise, fiscal stimulus packages would not work.
"I remain convinced that all the stimulus packages being launched around the world ... will have no lasting effect if we cannot clear the situation on the financial markets," he said.
"As long as credit does not circulate, those stimulus packages don't help much." (Writing by Marcin Grajewski, editing by Dale Hudson)