NEW YORK Dec 11 Fitch Ratings said the
bipartisan U.S. budget deal hashed out Tuesday still leaves U.S.
sovereign credit vulnerable to a downgrade, but reduces the risk
of damaging the economy or perceptions of U.S. creditworthiness.
The deal, Fitch said in a statement on Wednesday, also
suggests a lower risk of the kind of political brinkmanship that
led to a partial government shutdown in October.
"But the proposal does not increase the federal government
debt ceiling, which Congress will need to raise again by 7
February to give the Treasury the borrowing capacity it needs to
meet its payment obligations and avoid further recourse to
extraordinary measures," Fitch said.
Fitch said it still expects to decide whether its so-called
Rating Watch Negative outlook - a short-term and often
event-driven opinion - on AAA-rated U.S. sovereign debt will
result in a downgrade or not by the end of March 2014.
In October, Fitch put the U.S. on Rating Watch Negative
specifically because Congress was in danger of not increasing
the debt ceiling in a timely manner.
The $85-billion budget deal, while modest in spending cuts,
would end three years of impasse and the kind of fiscal
instability that led to the partial shutdown and pushed the
United States to the brink of default.
The deal, which has yet to be passed and signed into law,
would still only reduce the budget deficit $20-23 billion over
10 years, representing 0.1 percent of gross domestic product,
Standard & Poor's, in an historic move, cut its rating on
U.S. government debt to AA+ from AAA in August 2011 because of
the political impasses of the past. S&P has a stable outlook on
the credit while Moody's Investors Service rates the United
States at Aaa with a stable outlook.