2023-08-02 00:54:14
By Le Figaro with AFP
Posted yesterday at 23:56, Updated 5 hours ago
One of Fitch’s buildings, UK. Lubo Ivanko / stock.adobe.com
The rating agency notably reported an “erosion of governance” linked to the repeated crises on the debt ceiling.
The rating agency Fitch withdrew its precious AAA rating on Tuesday, August 1 in the United States and lowered it by one notch to AA+, a first since 2011, noting in particular a “erosion of governance” linked to the repeated crises on the debt ceiling. The agency justified its decision in the first place by the consequences of the “repeated deadlocks on the debt ceiling and last-minute resolutions”. “There has been a steady deterioration in governance standards over the past 20 years, including on fiscal and debt matters, despite the June agreement, backed by both parties, to suspend the debt ceiling until ‘in January 2025’lamented Fitch.
The White House immediately expressed its disagreement. “We strongly disagree with this decision”reacted the spokesperson for the White House, Karine Jean-Pierre, in a press release. “It flies in the face of reality to downgrade the United States at a time when President Biden has achieved the strongest recovery of any major economy in the world”she added.
The administration of Democrat Joe Biden and the Republican opposition had reached in extremis at the beginning of June, after several months of an intense political battle, an agreement to raise the debt ceiling and avoid a payment default by the United States. . But according to Fitch, despite this agreement, “Repeated political clashes over the debt ceiling and last-minute resolutions have eroded confidence in fiscal management.” Fitch warned at the end of May that it could downgrade the United States’ rating because of the risk of default.
Read alsoUnited States: Fitch maintains negative watch on AAA rating, despite debt agreement
Another reason why the agency ended up degrading the precious American “triple A”: the “budget deterioration expected over the next three years”as well as’“a high and growing public debt burden”. “The government does not have a medium-term budget framework, unlike most of its peers, and has a complex budget process. These factors, along with several economic shocks, tax cuts and new spending initiatives, have contributed to successive increases in debt over the past decade.noted Fitch. “Furthermore, only limited progress has been made to address medium-term challenges related to rising pension and health insurance costs due to the aging population”further underlined the rating agency.
The outlook changes from negative to stable, which means that Fitch does not anticipate any further deterioration in the short term. US Treasury Secretary Janet Yellen said in a statement that she “strongly disagrees with Fitch’s decision», lamenting that she is «based on dated data“. This is the first time since 2011 that one of the three major rating agencies has downgraded the rating of the world’s largest economy. It was then S&P which had deprived the United States of its precious “triple A”, which was a historic first, an AA+ rating in force today.
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