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Fitch says UK AAA status at risk without cuts

Fitch Ratings has warned that the UK will put its AAA status at risk if it does not announce significant public spending cuts in the pre-Budget report.

The ratings agency says that permanently and substantially higher public debt ratios would leave government finances more vulnerable to future shocks.

It also says that economic recovery and the natural ending of fiscal easing measures will not alone be sufficient to stabilise and reduce public debt burdens over the medium-term.

Fitch head of EMEA sovereigns ratings Brian Coulton says: “The credibility of the commitment to low inflation and sustainable public finances needs to be strengthened by greater clarity on strategies for withdrawing the exceptional fiscal stimulus of this year and next.”

It has also warned the UK as well as the US, France, Spain and Germany that their fiscal exit strategies will play a key part in future assessments by the rating agencies.

Fitch head of global sovereign ratings David Riley says: “Governments need to validate confidence in their commitment to fiscal consolidation over the medium-term – a key support to their AAA status and ability to fund and sustain large fiscal deficits in the near-term – by articulating credible exit strategies relatively soon.”

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