Moody's said they all faced 'key challenges' and it warned that if they were slow to withdraw stimulus, and central banks raised interest rates, the cost of servicing their debt could pose a risk to their credit ratings. Mark Zandi (above) chief economist and co-founder of Moody's. -- PHOTO: REUTERS
LONDON - THE top big four economies are strongly placed to keep their top credit status but will face slightly increased risk when they curb overspending despite weak recovery, Moody's said on Monday.
The United States, Germany, France and Britain remain 'well positioned,' Moody's credit rating agency said. Its report contrasted with some warnings in recent months that huge public deficits and debt could undermine the credit status of some leading economies.
Moody's, one of the three leading world credit agencies, said that 'the ratings of all AAA governments are currently well positioned despite their stretched finances.' Its remarks also covered other AAA-rated countries - Spain, which is widely considered to having particularly strained public finances, and Denmark, Finland, Norway and Sweden.
But Moody's said they all faced 'key challenges' and it warned that if they were slow to withdraw stimulus, and central banks raised interest rates, the cost of servicing their debt could pose a risk to their credit ratings. 'The recovery that has taken hold across the global economy remains fragile in several of the large advanced economies,' the agency said.
Most of these had applied aggressive budget and also monetary policies to support their economies through the financial crisis. This exposed governments to 'substantial execution risk' in the way they withdrew from the exceptional stimulus they had provided, Moody's said.
And that 'could yet make their credit more vulnerable,' the senior vice president in Moody's sovereign risk group, Arnaud Mares, said. But 'the ratio of interest payments to government revenues indicates that the ratings of all AAA governments remain well positioned,' he said. -- AFP
The Straits Times
