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Standard & Poor’s yesterday highlighted the task facing the next finance chief, saying it may cut Britain’s AAA credit rating for the first time as debt heads to 100 percent of gross domestic product amid the worst recession since World War II.
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“Does this government in its current state have the steel and the authority to put through a painful program of tax increases and spending reductions and nurture the economy in a consensual way through a period of difficult economic adjustment?” said George Magnus, senior economic adviser at UBS AG. “No. The politics just aren’t right.”
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“Britain’s economic reputation is on the line,” said George Osborne, the lawmaker in charge of Treasury affairs for the Conservatives. “Unless Britain has a government with a credible plan to reduce debt, there will be a further downgrade, with all of the serious consequences for our prosperity that would entail.”
Debt and ratings concerns are already starting to affect other countries. Yesterday, U.S. Treasury Secretary Timothy Geithner committed to cutting the budget deficit as concern about deteriorating creditworthiness deepened.
Last time I looked, American and British high finance were joined at the hip, like Siamese twins.
