S&P: No Significant Chance of US Default

Tuesday, 18 Jan 2011 12:14 PM

 

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Debt ratings agency Standard & Poor's said Tuesday there was no significant chance of a U.S. government debt default.

The agency also said that if the debate now stirring in Congress to boost the U.S. debt ceiling above its current $14.3 trillion level resulted in a long delay or a refusal to boost that ceiling, dramatic measures would eventually be required to avert a default.

"The debate brewing in the U.S. Congress over raising America's debt ceiling above its current $14.3 trillion is attracting more attention than usual, setting the stage for a potential deadlock between Democratic and Republican members of Congress," said an article published by S&P.

Permanently refusing to raise the debt ceiling, or delaying too long, would eventually require dramatic measures to avoid default: either an immediate, and likely disruptive, reduction in government expenditures, or a sudden increase in taxes or other government revenue, likely to have similar consequences, S&P said.

Default by the U.S. Treasury could cause significant and long-lasting financial and economic disruption, the debt ratings agency said.

"We don't believe there is a significant chance of this occurring, as implied by our 'AAA' U.S. sovereign credit rating and its stable outlook," S&P said.

The agency noted U.S. Treasury Secretary Timothy Geithner's observation that with just $335 billion of 'headroom' remaining, the United States could hit its current debt ceiling as early as March 31.

"This effectively gives lawmakers a deadline by which they must act or leave the U.S. unable to borrow more to pay its debts — and, in theory, face the prospect of defaulting on its obligations, however unlikely that may be," S&P said.

The prospect of the curtain falling on March 31 "has set the stage for some high-octane political theater," S&P said.

© 2014 Thomson/Reuters. All rights reserved.

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