Moody's Sends Warning To Triple-A Rated Countries, Including U.S. and U.K
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The major Western economies including the U.S. and the U.K. are under great pressure according to Moody’s Investors Service, which Monday said that the global debt crisis is not isolated to smaller weak nations.
The report said that the recovery has taken hold across the all of the world’s economies, including those wealthier and more advanced countries that have implemented the most aggressively based stimulus programs.
"This exposes governments to substantial execution risk in the implementation of their exit strategies, which could yet make their credit more vulnerable," says Arnaud Mares, Senior Vice President in Moody's Sovereign Risk Group.
The ratings of Aaa economies, which includes the U.S., the U.K., Germany, France, Spain, Norway, Sweden, and Finland, are unchanged. However Moody’s analysts stated that the distance from being downgraded for these nations has "substantially diminished."
"In light of the muted recovery, discretionary fiscal adjustment is now the principal means of repairing the damage that the global crisis has inflicted on government balance sheets," says Pierre Cailleteau, Managing Director of Moody's Sovereign Risk Group. "A key issue is whether governments are able and willing to implement such unprecedented adjustments.”
The nations that currently hold a Aaa rating are in a position of having to correctly time fiscal policy tightening before the economic recovery is capable of standing up on its own. However, if the governments wait too long to pull stimulus programs it could test the stability of the markets, and possibly could force the central banks to take action.
"At the current elevated levels of debt, rising interest rates could quickly compound an already complicated debt equation, with more abrupt rating consequences a possibility," indicates Cailleteau.
The report noted that among the top-rated countries, the U.S. and the U.K. are in the toughest positions as their ratings rely heavily on other countries and their ability to repair the damages of the global recession.
The report said that the recovery has taken hold across the all of the world’s economies, including those wealthier and more advanced countries that have implemented the most aggressively based stimulus programs.
"This exposes governments to substantial execution risk in the implementation of their exit strategies, which could yet make their credit more vulnerable," says Arnaud Mares, Senior Vice President in Moody's Sovereign Risk Group.
The ratings of Aaa economies, which includes the U.S., the U.K., Germany, France, Spain, Norway, Sweden, and Finland, are unchanged. However Moody’s analysts stated that the distance from being downgraded for these nations has "substantially diminished."
"In light of the muted recovery, discretionary fiscal adjustment is now the principal means of repairing the damage that the global crisis has inflicted on government balance sheets," says Pierre Cailleteau, Managing Director of Moody's Sovereign Risk Group. "A key issue is whether governments are able and willing to implement such unprecedented adjustments.”
The nations that currently hold a Aaa rating are in a position of having to correctly time fiscal policy tightening before the economic recovery is capable of standing up on its own. However, if the governments wait too long to pull stimulus programs it could test the stability of the markets, and possibly could force the central banks to take action.
"At the current elevated levels of debt, rising interest rates could quickly compound an already complicated debt equation, with more abrupt rating consequences a possibility," indicates Cailleteau.
The report noted that among the top-rated countries, the U.S. and the U.K. are in the toughest positions as their ratings rely heavily on other countries and their ability to repair the damages of the global recession.
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