June 21, 2011 / 9:54 AM / in 8 years

Risk of U.S. credit rating downgrade increased-S&P

LONDON, June 21 (Reuters) - The risk of a downgrade to the credit rating of the United States has increased due to a lack of political consensus on how to employ the country’s balance sheet flexibility, Standard and Poors’ said on Tuesday.

“Theoretically, there’s a lot of flexibility on the fiscal and the monetary side: you have a central bank that can expand its balance sheet, and that’s a real boon,” Moritz Kraemer, head of sovereign credit ratings for Europe at Standard & Poor’s, said on Tuesday.

“But the problem is this flexibility needs to be employed and for that you need political consensus. That’s not very visible right now.

“The downside risks in the medium term have increased and we did assign a negative outlook that signifies there’s a one in three chance the rating might go down in the next few years,” Kraemer told a Euromoney conference in London.

Reporting by William James and Emelia Sithole

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