This post was edited by SMITHI at 2012-2-14 10:05|
14 February 2012
Moody's rating agency places UK on negative outlook
The US credit ratings agency, Moody's has placed the UK on negative outlook.France and Austria, who also share a top triple A rating, have been similarly graded.
The credit ratings of Italy, Spain and Portugal have been downgraded.
In a statement, Moody's blamed the euro area crisis for the adjustments citing the "susceptibility (of selected EU countries) to the growing financial and macroeconomic risks emanating from it."
Responding to the ratings decision by Moody's the Chancellor of the Exchequer said: "This is proof that, in the current global situation, Britain cannot waiver from dealing with its debts."
The coalition government has come under increasing pressure to ease up on its austerity measures in the face of growing unemployment and stalled economic growth.
"Reality check" Continue reading the main story AnalysisNorman Smith Chief political correspondent, BBC News Channel
Treasury sources have sought to play down the significance of the ratings agency Moody's decision to place the UK's Triple A rating at risk.
The source said the decision was not "entirely unexpected" given the difficult economic situation facing the UK. Much of the reason for the potential downgrade was a consequence of the difficulties in tech eurozone.
The source said that Moody's made clear any "discretionary fiscal loosening" would make a downgrade more likely and that this underscored the need for the Government out stick to its deficit reduction strategy.
The Chancellor's statement added: "Moody's are explicit that it is only the Government's 'necessary fiscal consolidation' that is stopping an immediate downgrade, which would happen if there were any 'reduced political commitment to fiscal consolidation'. "This is a reality check for anyone who thinks Britain can duck confronting its debts."
The BBC's economics editor Stephanie Flanders said that the negative outlook for the UK means Moody's think there is a 30% chance of a downgrade within 18 months.
A negative outlook is not the same as negative watch which means a more than 50% chance of a downgrade.
"There is no suggestion, in the agency's statement, that it would like to see the UK ease up on austerity," said the BBC's Stephanie Flanders.
"Quite the opposite. But the opposition will be quick to note that preserving Britain's top rating has long been a central plank of George Osborne's case for deeper cuts."
"For this ratings agency, at least," says Stephanie, "Britain's triple A is at greater risk now than at any time since Mr Osborne's first budget."