WASHINGTON: In an unprecedented move, credit rating agency Standard & Poor’s downgraded the US government’s ‘AAA’ sovereign credit rating – a development which raises concerns that investors will lose confidence in its economy.
"We have lowered our long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’ and affirmed the ‘A-1+’ short-term rating.
"We have also removed both the short- and long-term ratings from CreditWatch negative," S&P said in a statement.
The downgrade, it said, reflects its opinion that the fiscal consolidation plan which Congress and the administration recently agreed to "falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics."
"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011," the agency said.
"Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon."
Other prominent credit rating agencies – Moody’s Investors Service and Fitch Ratings – affirmed their AAA credit ratings even as President Barack Obama signed a bill that ended the debt-ceiling impasse that pushed the Treasury to the edge of default. Moody’s and Fitch also said that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens. (PTI)