Britain gets credit rating warning (From Dorset Echo)

Britain gets credit rating warning

11:54pm Monday 13th February 2012 in National News © Press Association 2011

Britain has been threatened with the loss of its AAA credit rating amid fears over weaker growth prospects and potential shocks from the eurozone crisis.

Ratings agency Moody's has put the UK on "negative outlook", increasing the chance of the country being stripped of its AAA status.

Chancellor George Osborne said the assessment was a vindication of the Government's tough austerity measures and "a reality check for anyone who thinks Britain can duck confronting its debts".

Moody's downgraded the ratings of six countries and also put France and Austria on the same caution as the UK amid violent protests in Greece over stringent measures to secure a fresh bailout.

Explaining its decision on the UK's prospects, it pointed to "increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years".

"Any further abrupt economic or fiscal deterioration would put into question the Government's ability to place the debt burden on a downward trajectory by fiscal year 2015-16," it said. It also predicted that the "high risk of further shocks (economic, financial, or political) within the currency union are exerting negative pressure".

Mr Osborne said: "This is proof that, in the current global situation, Britain cannot waiver from dealing with its debts. Moody's are explicit that it is only the Government's 'necessary fiscal consolidation' that is stopping an immediate downgrade, which would happen if there were any 'reduced political commitment to fiscal consolidation including discretionary loosening'.

"This is a reality check for anyone who thinks Britain can duck confronting its debts."

But shadow chancellor Ed Balls said the move was "a significant warning", and urged the Government to spark economic growth, adding: "With our economy now in reverse, unemployment at a 17-year high and £158 billion extra borrowing to pay for economic failure, the case for a change of course and a real plan for jobs and growth is growing by the day."

Moody's said it foresaw three main risks to the UK's top rating, the first being a combination of ongoing slow growth with "reduced political commitment to fiscal consolidation" or a "failure to respond" to worsening conditions. Other dangers were "a sharp rise in debt-refinancing costs, possibly associated with an inflation shock or a deterioration in market confidence over a sustained period" or a fresh crisis in the banking sector.