Despite warnings about the fate of American and English AAA credit ratings from companies like Standard & Poor’s, Moody’s has actually come out to give the green light in a latest report.
Actually, the U.S. and U.K. credit ratings are ‘well positioned’:
A key finding is that the AAA ratings of the UK and the US are secure because of the capability of their respective governments to reverse recent deficits.
These two governments face the biggest interest repayments relative to the size of their incomes, compared with other economic giants.
The report says that these governments will be able to repair their balance sheets in the wake of the credit crisis.
“In light of the muted recovery, discretionary fiscal adjustment is now the principal means of repairing the damage that the global crisis has inflicted on government balance sheets,” says Pierre Cailleteau, managing director, Moody’s Sovereign Risk Group.
Of course, it is not just a matter of being capable of reducing deficits, it’s also a matter of then actually having the will to do so. The second bit is the real challenge, as Greece highlights so well these days.