U.S. lost their top AAA rating from Standard & Poors, an unprecedented blow to the world’s largest economy after a political struggle that leaves the U.S. on the brink of default.
S & P said it lowered one step to AA the long-term rating because of concerns about the U.S. budget deficit and debt.
Obama administration attacked the credibility of S & P claiming that it found “an error of 2,000 billion dollars”.
S & P had to remove that figure from the analysis of the agency, after Treasury officials have found that estimates of discretionary spending of the U.S. were 2,000 billion dollars higher, said sources close to the discussions.
“A decision affected by an error of 2,000 billion speaks for itself”, said a Treasury spokesman.
The head of S & P: “It was the agency duty was to downgrade the debt rating of U.S.”
Head of country rating division of Standard & Poor’s, David Beers, said that “it was the agency’s duty” to reduce the top triple-A rating of U.S. to AA+.
“We take our responsibilities very seriously and if, at the end of our analysis, it is concluded by the committee that a rating is not where it’s supposed to be, it’s our duty to make this decision”, Beers said in an interview with Reuters.
Beers acknowledged that the decision of S & P was greatly influenced by changing of the “political dynamics” in Washington, which “prevented members of Congress to reach a more comprehensive plan to reduce the budget deficit”.
In a release issued after the announcement of the decision to downgrade the rating, S & P confirmed that it the changed economic assumptions following discussions with the Treasury, but argues that this not influenced the decision to reduce the rating.
“The main point of the rating assessment remains the current level of debt, debt trajectory as a share of economy, and the apparent reluctance of elected officials as a whole to address the medium-term fiscal perspective of the U.S.”, it says in the statement.
The decision of the rating agency could increase credit costs for the U.S. administration, companies and households.
Rating outlook is negative, indicating another possible downgrade in the next 12-18 months.
Fitch and Moody’s have not planned to downgrade the U.S. rating
The other two major agencies, Moody’s and Fitch, maintained this week the U.S. credit rating of “AAA”. Last week, the Democratic Party and Republican Party have agreed to a plan, supported by the White House, in order to increase the debt ceiling and reduce the budget deficit to avoid the U.S. default.
The agreement allows a debt ceiling increase, from 14,300 billion dollars, with 2,100-2,400 billions of dollars, in three successive steps. The new threshold is high enough to cover the loan needs of the state by 2013. However, the program provides for spending cuts of about 2,400 billion dollars over the next ten years.
The rating agency Standard & Poor’s lowered the country rating of the U.S. for the first time since it was granted in 1917.