Thursday, May 13, 2010

Debt of US UK and JAPAN: They should treated like debt of Greece

After Greece, Portugal and Spain suffered rating downgrades in April due to escalating fiscal problems, investors ask if the same standards are being applied to advanced economies.

While there is a broad agreement among investors that credit rating agencies were justified in downgrading peripheral European sovereigns last month, investors are questioning why advanced economies such as the UK, the US and Japan – which face mounting fiscal problems of their own – have managed to retain their triple-A ratings.

According to the International Monetary Fund, US debt-to-GDP is predicted to hit 109.7% in 2015, up from 83.2% at the end of last year. Over the same period, the UK's debt ratio is expected to increase from 68.2% to 90.6%; while Japan's debt burden is forecast to reach 248.8% in 2015, up from 217.6% at the end of 2009.
"The rating agencies haven't been consistent and some countries have been singled out more than others," says Achilles Risvas, a managing partner at Dromeus Capital in Geneva.

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