2023-05-25 00:47:49
Fitch puts pressure on the United States mired in debt ceiling negotiations. The rating agency on Wednesday placed the American AAA rating, the highest possible, “under surveillance” because of the risk of default.
The move “reflects political tensions that stand in the way of addressing the issue, such as raising or suspending the debt ceiling as the deadline rapidly approaches,” the company said in a statement.
The Treasury places the fateful date on June 1
Fitch still “expects” a timely resolution. But the agency’s experts believe “the risks have increased that the debt ceiling will not be raised or suspended in time and that the government will begin to fail to make some payments”.
Congress must quickly raise the debt ceiling to avoid bankruptcy, which the US Treasury says might happen on June 1. This ceiling is currently 31,000 billion dollars. President Joe Biden’s teams and Republican camp negotiators have yet to find a compromise.
Showdown between Democrats and Republicans
To vote in favor of a higher debt ceiling, the Republicans require a budgetary effort. Democrats also favor deficit reduction, but not in the same way.
“Failure to reach an agreement (…) would be a negative sign in terms of governance in general and of the United States’ desire to honor its obligations on time,” insists Fitch. The rating agency therefore signals that it will closely monitor what will happen: if the United States does not pay a debt due date on June 1 or 2, it will be considered in default, and subsequent installments due within 30 days will become “very risky” (CCC). Fitch notes, however, that for all other debt, the rating will remain unchanged, as the country holds the largest reserve of silver in the world.
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