Economy USA

Moody’s provides the United States not to cap debt

NEW YORK (Reuters) – On Monday the rating agency Moody’s suggested the United States than simply eliminating the ceiling on external debt in order to reduce uncertainty for holders of sovereign bonds.

Moody’s noted in a reported that the United States is one of the few countries in the world to set a maximum level of their debt, fueling a “periodic uncertainty” about the ability of governments to meet their obligations.

“We would reduce our risk assessment of a credit event if the government would change its management arrangements of sovereign debt to reduce or eliminate this uncertainty,” writes Steven Hess, one of Moody’s analysts, in this report.

Last week, ‘s warned that it would lower the AAA rating of the United States should they default on their debt.

In Washington, the pressure increases on political leaders, but the White House and Congress fail to agree on reducing the budget deficit, which affects any agreement on raising the debt ceiling.

CHILE CITY IN EXAMPLE

Moody’s said to have always considered the risk of a U.S. default as very low because Congress has already authorized a higher debt many times over the decades, often without much controversy.

But the depth of the current divisions between parliamentarians Republican majority in the House of Representatives and the Democratic administration of President Barack Obama leads a very high degree of uncertainty “and urges us to raise our risk assessment of a credit event,” Steven Hess said.

Not hesitating to intervene further in the political debate, Moody’s suggests the United States to draw on other examples, and cites the case of Chile, widely regarded as a good student of Latin America fiscal policy.

“Elsewhere, the level of deficit is determined by a ‘fiscal rule’, which means that the digging of the debt is small, but not limited technically,” said Moody’s, stating that this system was effective in Chile.

The rating agency also refers to the Maastricht criterion in force for the European Union, which sets 60% of GDP threshold not to exceed the volume of debt. Moody’s, however, indicates that this rule is frequently broken by the Member States.

According to the agency, the limit applied to concrete in the United States did not limit the country’s debt as it has consistently been found and is not related to the level of budget spending approved by Congress.

 

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