Fitch is eyeing the U.S. And its credit rating as the government shutdown closes in on its third week.
Speaking in London on Wednesday, Fitch global head of sovereign ratings James McCormack said that the agency could cut the U.S. Triple-A sovereign credit rating later this year if the shutdown causes the government to hit its debt ceiling.
The U.S. Is slated to hit its debt ceiling on March 1 if the government doesn’t take action. In the event the debt ceiling is not raised, the U.S. Government would be legally banned from borrowing money to pay financial obligations. The only way to pay those debt obligations, then, would come byway of cash in the U.S. Treasury.
A protracted government shutdown could have a profound impact on the debt ceiling and could ultimately push the U.S. Into default if the debt ceiling isn’t handled. And that has concerned Fitch.
“If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget… and whether all of that is consistent with triple-A,” McCormack said, according to Reuters.
Still, the chances of a credit rating downgrade don’t appear to be high. McCormack’s comments come just days after Fitch released a commentary on the U.S. Government shutdown. While Fitch acknowledged that a failure by the U.S. Government to raise its debt limit would be concerning, it believes the chances of the U.S. Not lifting its debt limit are “remote.” S&P and Moody, which also provide credit ratings, have signaled in the last several months that the U.S. Government’s credit ratings are secure.
That’s not doing much to help U.S. Relations with the European Union. In a letter sent to Congress on Wednesday, EU’s delegation for U.S. Relations said it’s experiencing an “increasingly harmful approach from the White House,” according to the Associated Press. The delegation added that “the Trump Administration could not have chosen a worse moment to attack the EU.”
The group cited Trump and his top officials “lambast[ing] the EU as bureaucratic,” among other charges, and said that the comments “play into the hands of rival global powers and can only lead to greater fragmentation rather than much needed increased cooperation.”
