Alarm bells continue to ring over the United States’ exploding budget deficit and government debt burden.
Jim Leaviss, head of retail fixed interest at M&G, the fund-management arm of the Prudential, says our nation "will lose its AAA rating – but not in 2011,” The Telegraph of London reports.
The U.S. budget gap totaled $1.29 trillion in the year ended Sept. 30, close to 10 percent of GDP, and the government debt stands at $13.8 trillion, about 100 percent of GDP.
To be sure, Leaviss sees France in even greater danger than the United States. Europe’s second-biggest economy remains "the AAA economy closest to a downgrade," he says. France’s government debt totals 78 percent of GDP.
The United Kingdom has debt woes too, Leaviss notes, though he doesn’t say whether it’s triple-A rating is in jeopardy.
Economic growth won’t be strong enough to curb debt in all three countries, Leaviss says. So their central banks will keep easing. "These economies will continue a period of expansion that is sub-trend," he says.
"Central-bank thinking in Europe has moved away from pure inflation-targeting to more of a 'dual-mandate,' like the Federal Reserve, of full employment and price stability."
Moody’s Investors Service also warned earlier this year that the United States may face a downgrade. “Growth alone will not resolve an increasingly complicated debt equation,” it wrote in a report.
© 2012 Moneynews. All rights reserved.