Thursday, August 26, 2010

S&P Warns U.S. on Debt Downgrade

The United States government needs to take steps to preserve its top AAA-rating, a Standard & Poor's Ratings (S&P) official told Dow Jones newswire in an interview published on Thursday.

Financial Crisis
The measures taken in response to recommendations President Barack Obama's commission on fiscal responsibility would be crucial in the view S&P takes on the U.S. credit rating, he said.
"It is very important for the credit standing of the United States that the Congress considers very carefully what the fiscal commission proposes," John Chambers, chairman of S&P's sovereign rating committee, was quoted as saying.
"It is very important for Congress to take the required steps."
S&P maintains the United States' top AAA rating with a stable outlook, meaning there is not a significant chance of a change in the near future.
However, it has repeatedly warned about the gigantic deficit and the debt burden in the world's biggest economy, calling it a challenge for the government.
David Beers, S&P's global head of sovereign ratings said in a July report the U.S. does not have unlimited fiscal flexibility and the best-case scenario for the U.S. would be for its debt-GDP ratio to peak at around 80 percent, although there was a chance it could exceed 100 percent.
"So we don't think these political decisions on tackling the public finances can be put off forever," Beers said in the report.