U.S., Other Major Economies in Danger of Losing Top Credit Rating
David Sessions
Washington Reporter
Posted:
03/15/10
The United States, Germany and other major economies have moved closer to losing their top credit rating, according to a new report from Moody Investor Services, the New York Times reports. Countries that currently have the "Aaa" rating -- a group that also includes Britain, France and the Nordic nations -- are "stable," the report says, but their "distance-to-downgrade" has substantially decreased.
"Growth alone will not resolve an increasingly complicated debt equation," the Moody's report said. "Preserving debt affordability at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion."
The United States' ratio of interest payments to government revenue, which the report calls "debt affordability," has fallen to 8.7 percent. The ratio was 10 percent two years ago, but is still considered high.
"Growth alone will not resolve an increasingly complicated debt equation," the Moody's report said. "Preserving debt affordability at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion."
Credit ratings are important because higher-rated governments can borrow at lower costs. Greece has been hit by strikes and other protests as it adopts austerity measures in the face of its debt crisis.
The United States' ratio of interest payments to government revenue, which the report calls "debt affordability," has fallen to 8.7 percent. The ratio was 10 percent two years ago, but is still considered high.