Tags: Moody's | Sovereign Debt | Risk | Tumultuous

Moody's: Foreign Debtors Getting Out of Hand

By    |   Thursday, 17 Dec 2009 02:53 PM

Recent country debt downgrades for Greece and Mexico, along with warnings for the U.S. and U.K., indicate more trouble ahead for sovereign debt, Moody’s says.

The main problem is that governments — before the financial crisis and after — have built up massive debt burdens.

"2010 is probably going to be a tumultuous year for sovereign risk," Pierre Cailleteau, Moody's global head of sovereign ratings, told Reuters.

"Long-term interest rates will rise globally, which will reveal the real costs of the financial and economic crisis."

Cailleteau says the U.S. and U.K.’s triple-A ratings aren’t in danger for 2010.

"But this will be the year where both the U.S. government and the U.K. government will have to articulate a credible plan to address their problems of large debt," he said.

The Congressional Budget Office estimates that U.S. government debt will total 61 percent of GDP this year.

"In the case of the U.K. and the U.S., they are losing altitude in the triple-A space," Cailleteau said. "If they don't react, if there is no policy response, the loss of altitude will be inexorable."

Dubai’s recent debt meltdown made many experts concerned about government debt.

“Dubai could be the beginning of a series of sovereign debt issues or crises,” Mohamed El-Erian, CEO of Pimco, told The New York Times. “What Dubai is going to do is make people think more intensely about the lagging implications of last year’s crisis.”

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Recent country debt downgrades for Greece and Mexico, along with warnings for the U.S. and U.K., indicate more trouble ahead for sovereign debt, Moody s says. The main problem is that governments before the financial crisis and after have built up massive debt burdens....
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Thursday, 17 Dec 2009 02:53 PM
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