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SP defends U.S. downgrading amid widespread criticism

08-10-2011 08:56 BJT

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Standard and Poor's, of the now infamous US debt downgrade, has received a lot of criticism from politicians and investors the world over. The agency's move has erased trillions of dollars in value on global equity markets and sent oil prices spiraling. Yet, S&P's chief of government debt rating unit is holding strong and defends the downgrade.

There is widespread condemnation from Washington to Wall Street of Standard and Poor's decision late Friday to downgrade U.S. debt from AAA to AA+.

David Beers, head of S&P's government debt rating unit, defends the downgrade, saying Washington's intense fighting has increased the risk leaders will have a hard time coming together to clean up America's balance sheet.

Two traders stand outside the New York Stock Exchange on Aug. 8 (Reuters/ Shannon Stapleton)

Beers said, "For medium term fiscal consolidation to be credible, we think there has to be some buy-in across the political divide here. And as we have seen with the agreement last week it's proved it is extraordinarily difficult to get a consensus among Democrats and Republicans both on fiscal choices to be made in the budget now and in the future and also on the balance between spending and revenue decisions. So that debate will continue to play out, we're not sure that a consensus is going to build from here."

Along with the downgrade, S&P has placed U.S. debt on negative outlook, which means there is the chance of another downgrade within 6 to 24 months, depending, in part, in this case, on how much the economy recovers.

S&P's chief of government debt rating unit is holding strong and defends the downgrade.

Beers said, "This has been a subpar economic recovery. It was underscored by the Bureau of Economic Analysis data revisions the week before last, so we still haven't returned to the peak compared to the start of the recession and if that subpar recovery were to continue, that itself would, you know, create additional fiscal pressure, so that's something that we are watching very carefully, closely."

And in S&P's view, if the recovery continues to stumble, the government will see less revenue from taxes. That in turn could make it even tougher to balance the books.

Editor:Li Wanran |Source: CNTV.CN

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