News for the Empty Room

 

Speaking at the firm’s global banking conference in New York, Fitch sovereign group managing director Ed Parker said ” the U.S. does not have a credible fiscal consolidation plan” and that “if we don’t see one after the election, I would expect a downgrade.”

Fitch rates the U.S. at triple-A but put it on negative outlook earlier this year, and Parker’s comments were a reiteration of the firm’s position. Fitch has the U.S., U.K. And France on negative outlook because of high debt-to- gross-domestic-product-ratios.

Parker noted that the three countries, plus Germany, have the top credit ratings but are also the most heavily indebted nations.

“There is a limit to how high these government debt levels can go,” Parker said.

Regarding the future of the euro zone, Parker said that in the event of a Greek exit from the euro zone, all member countries in the euro zone would be put on negative ratings watch and placed under review. Also, he said that the peripheral countries of Italy, Spain, Ireland, Portugal and Cyprus, all currently on negative outlook, would be downgraded.

“The big concern is potential contagion to other countries,” Parker said.

Mr. Parker added that the most likely outcome for Europe is to “muddle through” its financial crisis, rather than take definitive action in any direction. A break-up of the euro zone would be “financially and politically costly,” and even if Greece were to exit “there’s no blueprint for that to happen,” he said.

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