Fitch stands by US, France as it confirms AAA status
Ratings agency says dollar's special status gives America strength on debt
THE US and France both had their top AAA rating status confirmed today, even as markets started to price in a global economic slowdown.
Rating agency Fitch said it will not change the AAA rating it gives the US government, even though rival Standard & Poor's (S&P) cut its US rating two weeks ago.
Meanwhile the head of French business at S&P said that France would keep its AAA rating, with a stable outlook.
The top French rating had been the subject of intense speculation since S&P downgraded the US government's debt by one notch earlier this month.
"We are confident in this stable AAA rating," S&Ps Carole Sirou told RTL radio in France.
She said she did not expect the rating to change. Ms Sirou said that the French rating did not depend on specific budgetary commitments, but was based on "trajectory, a commitment".
The boost to the French government may well confirm its view that it was correct not to increase the European bailout rescue funds, or consider euro area bonds, when French President Nicolas Sarkozy held talks this week with Germany's Angela Merkel.
Fitch said it was not downgrading the US, because the US could support more debt than other AAA rated countries, because of the dollar's status as the world's main reserve currency and because of the diversified US economy.
Fitch's view of the US's top credit rating reads like a rebuttal of S&P's decision to cut the US rating to AA+ from AAA. When it made its cut, S&P said lawmakers had failed to cut spending enough to reduce record deficits.
"Leaving aside arguments about debt dynamics, the US's relative wealth and productivity, and political will, the US is anything but just another sovereign," Fitch analysts Jeremy Carter and Alex Griffiths wrote yesterday in a report.
They said the unique role of the dollar in world finance meant that the US government effectively had first call on any excess global savings, meaning it could always borrow more cheaply than any other country.
Markets have backed that assertion in the two weeks since S&P cut its rating on the US.
The yield, or interest the US pays to borrow over for 10-years has fallen to a record low of 1.97pc since the cut compared to 3.33pc in January. (Additional reporting Bloomberg, Reuters)