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Britain loses Moody's AAA credit rating

25 Feb 2013 THE AGE


BRITAIN'S opposition is tearing into the government over what it calls failed policies, after Moody's stripped the country of its coveted triple-A credit rating.

However, while analysts are calling the loss an embarrassment for Finance Minister George Osborne and his handling of Britain's debt and deficit problems, they say the downgrade will have a limited impact in the international markets.

In an expected rebuff to London's hopes that sharp spending cuts would both gradually eliminate the deficit and boost growth, Moody's rating agency has cut Britain's grade by one notch to Aa1.

Labour opposition finance spokesman Ed Balls has ripped into Chancellor of the Exchequer Osborne, saying the entire point of his austerity drive has failed.

"The Chancellor said this would be a humiliating blow and the first test of his policy was to avoid it," he told BBC television on Saturday.

"Economically, the credit rating decision itself makes no difference at all. What the credit rating agencies are doing, though, is reflecting the reality and the reality is an economy which is not growing, a deficit which is getting bigger, families in real stress and a government which is ploughing on regardless with a plan which is not working - saying 'the medicine is not working, let's increase the dose of the medicine'."

However, Howard Archer, chief UK economist at IHS Global Insight research group, says the market has been anticipating the downgrade for some time, though the pound sterling currency may be vulnerable.

"The loss of the AAA rating certainly puts pressure on Mr Osborne to come up with more initiatives in the [March 20] budget." he said. AFP

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