News Column

Fitch Warns of Possible Downgrade of U.S. Credit

June 8, 2011
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The United States risks losing its top credit rating if it's unable to make payments on its debt and encounters a "technical default," the Fitch rating agency said Wednesday.

The U.S. could face that dilemma if Congress and President Obama are unable to agree on budget cuts that the Republican majority in the House of Representatives want in order to raise the $14.3 trillion debt limit.

Fitch, in yet another warning from credit rating agencies, said the U.S. might not be able to maintain its AAA status if a deal cannot be reached by the Aug. 3 deadline. Raising the debt ceiling is necessary in order to make payments on treasury securities.

"Failure to raise the debt ceiling in a timely manner would imply a crisis of governance that could imperil the U.S. 'AAA' status," Fitch said.

Fitch said it was optimistic the Republicans and the White House will reach a deal, but said failing to do so could jeopardize the U.S. and global economic recovery.

"Default by the world's largest borrower and issuer of the pre-eminent reserve currency would be extraordinary and threaten the still fragile financial stability in the US and the world as a whole, especially against the backdrop of the European sovereign debt crisis," Fitch said.

Source: Copyright 2011 dpa Deutsche Presse-Agentur GmbH

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