ARIS — Major Western economies have moved “substantially” closer to losing their top-notch credit ratings, with the United States and Britain under the most pressure, Moody’s Investors Service said Monday in a reminder that the global debt crisis is not limited to the small or weak.
The ratings of the Aaa governments — which also include Germany, France, Spain and the Nordic countries — are currently “stable,” Moody’s analysts wrote in the report. But, it added, “their ‘distance-to-downgrade’ has in all cases substantially diminished.”
“Growth alone will not resolve an increasingly complicated debt equation,” Moody’s said. “Preserving debt affordability” — the ratio of interest payments to government revenue — “at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.”
That difficulty has been well-illustrated recently in Greece and Portugal, with strikes and protests as citizens hit the streets to oppose tough austerity measures that directly reduce entitlements and state benefits.
“It was to be expected that attention wouldn’t long be restricted to Southern Europe but would shift to other countries with big debts,” Michael Heise, chief economist for the German insurer Allianz in Munich, said.
The United States, Britain, France and Germany have always been rated triple-A by Moody’s, with the United States first rated in 1949.
Pierre Cailleteau, managing director of sovereign risk at Moody’s, stressed that none of their ratings were “threatened so far.”
But he did differentiate among the top countries, noting that Britain and the United States are in the toughest position.
“The U.K. and the U.S. are more tested than, say, Germany or France,” Mr. Cailleteau said in an e-mailed response to a question. “Their rating relies, more than in other countries, on their ability to repair the damage caused by the crisis on public finances.”
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