The US has been warned that the credit rating on its government debt could be cut by Standard & Poor's.
S&P is concerned that Democrats and Republicans will not be able to agree a plan to reduce the growing US deficit.
It has downgraded its outlook from stable to negative, increasing the likelihood that the rating could be cut within the next two years.
The US Treasury responded that S&P had underestimated its ability to tackle the national debt.
"Because the US has, relative to its 'AAA' [top-rated] peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.
The surprise move sent US and European shares lower. The S&P 500 fell the most in a month, and the US dollar dropped against the euro and Swiss franc. Oil was also sharply lower.
In Europe, the main UK, German and French indexes all fell by at least 2%.
The US federal deficit currently stands at $1.4tn (£858bn) and is expected to reach $1.5tn in the current fiscal year.
Budget battle
President Barack Obama suggested that the world could plunge into a new recession if the ceiling on money the US can borrow is not raised in the next few weeks, before the current debt limit of $14.3tn is reached. [Read More]
0 comments:
Post a Comment