The Two-Way
11:09 am
Thu December 22, 2011

Fitch: U.S. Needs To Get Its Financials In Order, Or Face Downgrade

The credit rating agency Fitch Ratings has issued another warning to Washington. If it doesn't come up with a plan to reduce the nation's budget deficit, Fitch might yank its AAA rating by the end of next year.

"Without such a strategy, the sovereign rating will likely be lowered," Fitch said in a statement today, according to Bloomberg. "Agreement will also have to be reached on raising the federal debt ceiling, which is expected to become binding in the first half of 2013."

Fitch had already assigned the U.S. a negative outlook in November. And as you may remember, Standard & Poor's slashed the country's credit rating to AA-plus in August.

Bloomberg has a bit from an analyst about what all this means:

"'The debt situation is a slow moving train wreck,' said Jason Brady, a managing director at Thornburg Investment Management Inc., which oversees about $73 billion from Santa Fe, New Mexico. 'The risks are apparent, but the benefits or strengths are also apparent. The strength of the U.S economy, the strength of the U.S financial system, is more apparent right now.'"

Today Fitch also assigned France's sovereign debt a negative outlook. Canada's Financial Post reports that a change in that country's credit rating could have "far-reaching effects" for the rest of the Eurozone. The bailouts are pinned on the good credit of France and Germany.

The Post reports on what France's AMF securities regulator said:

"'Keeping [our AAA rating] would need a miracle, but I want to believe it can happen,' Jean-Pierre Jouyet told a meeting with financial journalists.

"'I find it quite regrettable that we are accepting with a certain fatalism the loss of the AAA and that, with a certain resignation, we accept the downgrade of our country,' said Jouyet...

"While some investors have said the market has already discounted a downgrade to France's rating, Jouyet said there was no room for complacency as the move would have wide repercussions."

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