Fundamentals that support the “AAA” rating of the United States remain strong, but the administration must make tough choices on taxes and spending to reduce debt to a more secure level on a medium term, announced Tuesday Fitch.
Congress approved a plan that allows increasing the ceiling of U.S. debt, currently at 14.300 billion dollars, with 2,100-2,400 billions of dollars in three successive steps.
The new debt limit is considered high enough to cover the needs of the loans by 2013. At the same time the program is asking for spending cuts of about 2,400 billion dollars over ten years.
“The debt ceiling increase and the agreement on the plan to reduce costs support Fitch’s view that despite the intensity of political debate in Washington, there is political will and capacity to take necessary measures. In Fitch’s view, the agreement is an important first step, but not the end, a process to reach a plan for reducing the budget deficit at a level to ensure the “AAA” rating of the U.S. for mid-term”, it said in a release of credit rating agency.
Based on current trends, Fitch estimates that U.S. debt of federal and state authorities will reach 100% of GDP by the end of next year and will continue to climb in the medium term perspective which is inadequate to the “AAA” rating.
Fitch expects to complete an evaluation of the U.S. rating by the end of August.