by Davide Barbuscia
NEW YORK (Reuters) – Fitch downgraded the sovereign rating of the United States amid fiscal concerns, a deterioration in the country’s governance and increased political polarization as evidenced in part by the storming of the Capitol , Richard Francis, director at Fitch Ratings, told Reuters on Wednesday.
In a move that surprised financial markets, ratings agency Fitch downgraded the United States’ credit rating to “AA+” on Tuesday, saying fiscal governance is set to deteriorate over the next three years and the public debt burden, which continues to grow, was high, threatening the country’s ability to pay its bills.
According to Richard Francis, the agency took this decision in part because of a deterioration in governance, which is affecting confidence in the ability of the American administration to solve budgetary and debt problems.
The assault on the Capitol in Washington on January 6, 2021 testifies to this deterioration and strong polarization of political life, Fitch underlined during his meetings with the Treasury before the lowering of the United States’ rating.
“It’s something we’ve highlighted because it’s just a reflection of the deterioration of governance, it’s one of many elements among many,” he said.
“There’s the debt ceiling, there’s January 6. It’s obvious that if you look at the polarization of the two parties (…) the Democrats are leaning more and more to the left and the Republicans more and more on the right, so the center is collapsing,” said Richard Francis.
“We are not blaming either party for the fiscal situation,” he added.
Fitch, owned by the Hearst group, is the second major rating agency to withdraw its triple A rating in the United States, after Standard & Poor’s in 2011.
“I think the debt ceiling debate itself highlights the tensions and the polarization that we’ve seen, and it’s been happening every two years since 2011, more or less,” said Richard Francis.
The suspension of the debt ceiling, decided last June, will expire at the beginning of 2025, when a new political debate on the borrowing limit is likely, he noted.
For the United States to be upgraded would require a combination of factors such as a stabilization of debt to GDP, and possibly a permanent suspension of the debt ceiling, he added.
US Treasury Secretary Janet Yellen said she disagreed with Fitch’s decision, calling it “arbitrary and based on outdated data”.
The White House agreed, saying it “strongly disagrees with this decision.”
(Report Davide Barbuscia, French version Claude Chendjou)
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