This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.bbc.co.uk/go/rss/int/news/-/news/business-14164395
The article has changed 3 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| S&P says it may downgrade the US's triple-A debt rating | S&P says it may downgrade the US's triple-A debt rating |
| (40 minutes later) | |
| Standard & Poor's has become the latest ratings agency to issue a warning of a possible downgrade to the US's debt rating. | Standard & Poor's has become the latest ratings agency to issue a warning of a possible downgrade to the US's debt rating. |
| It said there was a "one-in-two" chance that it may cut the US's AAA rating if a deal to raise the government's debt ceiling is not agreed upon soon. | It said there was a "one-in-two" chance that it may cut the US's AAA rating if a deal to raise the government's debt ceiling is not agreed upon soon. |
| The warning comes as cross-party talks in Washington have failed to reach a consensus on the issue. | The warning comes as cross-party talks in Washington have failed to reach a consensus on the issue. |
| The US has until 2 August to raise government borrowing limits. | The US has until 2 August to raise government borrowing limits. |
| "Today's CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days," the agency said. | "Today's CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days," the agency said. |
| The agency added that it was concerned the talks between the government and the opposition had become "more entangled" and the two sides were not budging from their respective positions. | The agency added that it was concerned the talks between the government and the opposition had become "more entangled" and the two sides were not budging from their respective positions. |
| "Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling," S&P explained. | "Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling," S&P explained. |
| No-win situation | No-win situation |
| As a result of the stalemate between the parties, the government could find itself in a precarious situation. | As a result of the stalemate between the parties, the government could find itself in a precarious situation. |
| If it finds itself unable to borrow more money, there is a likelihood that the government will not be able to make scheduled payments on Treasury bills, bonds and other securities held by investors. | If it finds itself unable to borrow more money, there is a likelihood that the government will not be able to make scheduled payments on Treasury bills, bonds and other securities held by investors. |
| S&P said that in such a scenario, the government may be forced to curtail current expenses in an attempt to avoid such a default. | S&P said that in such a scenario, the government may be forced to curtail current expenses in an attempt to avoid such a default. |
| It warned that such a move would have a negative impact on the US economy. | It warned that such a move would have a negative impact on the US economy. |
| "We think that the effect on consumer sentiment, market confidence, and, thus, economic growth will likely be detrimental and long lasting," it explained. | "We think that the effect on consumer sentiment, market confidence, and, thus, economic growth will likely be detrimental and long lasting," it explained. |
| The agency said that while cutting government spending would dent consumer confidence, a default on payments had far bigger consequences. | The agency said that while cutting government spending would dent consumer confidence, a default on payments had far bigger consequences. |
| "If the government misses a scheduled debt payment, we believe the effect would be even more significant and, under our criteria, would result in Standard & Poor's lowering the long-term and short-term ratings on the US," it said. | "If the government misses a scheduled debt payment, we believe the effect would be even more significant and, under our criteria, would result in Standard & Poor's lowering the long-term and short-term ratings on the US," it said. |
| Long-term solution? | |
| The US's public debt has surged from from $10.6tn (£6.5tn) in January 2009 to $14.3tn at the end of May 2011. | |
| Economists have warned that the world's biggest economy needs to come up with a long-term solution to contain the rising debt levels. | |
| President Barack Obama has proposed a plan for up to $4tn in budget deficit reduction over the next 10 years, but Republicans have rejected that and other proposals because it calls for raising taxes. | |
| On Thursday, President Obama told lawmakers he wanted an agreement on a debt deal within 24-36 hours, according to aides. | |
| The comments came as a fifth consecutive day of cross-party negotiations failed to make a breakthrough. The president is scheduled to hold a news conference to discuss the troubled talks at 1100 (1500GMT) on Friday. | |
| S&P warned that if the US authorities are not able to agree on a consensus plan, the issue may linger on for years to come and hurt the US economy. | |
| "US political debate is currently more focused on the need for medium-term fiscal consolidation than it has been for a decade," it said. | |
| "Based on this, we believe that an inability to reach an agreement now could indicate that an agreement will not be reached for several more years." |