Moody’s has threatened to strip the United States of its AAA rating if next year’s Budget talks do not produce policies to tackle the country’s mounting debt.
The ratings agency, which currently has the US’ top rating rating on a negative outlook, said Congress needs to put the debt level on a downward trajectory to maintain the rating.
Moody’s said: “If budget talks lead to specific policies that produce a stabilisation and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable,” Moody’s said in a statement.
“If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.”
The threat comes only two months before the conclusion of an election campaign led by concerns over the state of the economy. The news should lift Republican hopes of a boost for Barack Obama’s challenger, Mitt Romney, by focusing attention on the size of the national debt.
Standard & Poor’s stripped the US of its top rating in August 2011.