British minister says US ratings cut 'entirely predictable'

6th August 2011, Comments 0 comments

British Business Secretary Vince Cable said Saturday that Washington's loss of its cherished AAA credit rating was "entirely predictable" after lengthy US political wrangling to lift the debt ceiling.

Standard & Poor's has cut the United States' top rating down a notch, to AA+, for the first ever time, technically signalling that the country's reliability for paying its debts had decreased.

"This was an entirely predictable consequence of the mess that the Congress created a few weeks ago when they couldn't agree on lifting the debt ceiling," British business secretary Vince Cable told Sky News.

"But they have now agreed that, and the United States' position is pretty secure."

"What it tells us about the wider picture is that financial markets are now focussing on the credit worthiness of governments. Three years ago it was on the banks and the banks' stability, and now it's on government debt.

"And that's why the UK is in a fairly good position. The markets perceive that we have got a stable government... and we are getting on top of the deficit problem and we have got a very clear programme to deal with it."

Turning to the eurozone debt crisis, which is currently threatening to engulf Italy and Spain, he added: "The eurozone countries have agreed a broadly sensible strategy to deal with the weakness of southern Europe.

He said they had accepted that Greece was solvent as long as some of its debts were written off.

"They have got to have a wider fund of money and more liquidity to help countries like Greece and Spain if they have an attack on their confidence."

Questioned about whether Italy would default, he said: "I don't think anybody really expects Italy to default. It's in a rather different position to Greece.

"There is a problem of confidence, they may need access to this emergency fund of money. But I think that the prospect of Italy defaulting, let alone leaving the eurozone, are very far fetched."

Although Britain is not a member of the eurozone, the country has been rocked by its own deficit tensions, forcing its coalition government to slash public spending and lift taxation.

Cable is a key Liberal Democrat member of the Conservative-led coalition administration which rose to power in May 2010.

© 2011 AFP

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