USA: The U.S. credit rating is downgraded, following a bitter political battle in Congress over raising the debt ceiling and the worst week in the U.S. stock market in two years

Record ID: 590969

  • Title: USA: The U.S. credit rating is downgraded, following a bitter political battle in Congress over raising the debt ceiling and the worst week in the U.S. stock market in two years
  • Date: 6th August 2011
  • Summary: NEW YORK, NEW YORK, UNITED STATES (AUGUST 02, 2011) (REUTERS) VARIOUS EXTERIORS OF STANDARD AND POOR'S BUILDING
  • Embargoed: 21st August 2011 13:00
  • Keywords:
  • Location: Usa, Usa
  • Country: USA
  • Topics: Economy,Politics
  • Reuters ID: LVADFWAZFFW0X0DRG45H2MI20CAV
  • Story Text: The United States lost its top-notch AAA credit rating from Standard & Poor's on Friday (August 5) in an unprecedented reversal of fortune for the world's largest economy.
    S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government's budget deficits and rising debt burden. The move is likely to raise borrowing costs eventually for the American government, companies and consumers.
    The decision follows a fierce political battle in Congress over cutting spending and raising taxes to reduce the government's debt burden and allow its statutory borrowing limit to be raised.
    On Aug. 2, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good "down payment" on fixing America's finances.
    The political gridlock in Washington and the failure to seriously address U.S. long-term fiscal problems came against the backdrop of slowing U.S. economic growth and led to the worst week in the U.S. stock market in two years.
    The S&P 500 stock index fell 10.8 percent in the past 10 trading days on concerns that the U.S. economy may head into another recession and because the European debt crisis has been growing worse as it spreads to Italy.
    U.S. Treasury bonds, once undisputedly seen as the safest security in the world, are now rated lower than bonds issued by countries such as Britain, Germany, France or Canada.
    The outlook on the new U.S. credit rating is "negative", S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months.
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