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Fitch threatens to downgrade the US rating 'AAA'

MADRID, 25 May.

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Fitch threatens to downgrade the US rating 'AAA'


The Fitch credit rating agency has put the 'AAA' rating, the highest solvency grade, of the long-term debt of the United States on negative watch due to the political situation that prevents reaching a resolution to increase or suspend the debt limit despite the risk that the Treasury may not meet the government's payment obligations.

The risk rating agency has stressed that "it still awaits a resolution of the debt limit before date X (when the US Treasury exhausts its cash position and its ability to take extraordinary measures without incurring new debt)", but it has warned that the risks have increased that the debt limit will not be raised or suspended before this date and, consequently, that the Government may begin to default on some of its obligations.

In this regard, he has criticized the brinkmanship in relation to the debt ceiling and the failure of the US authorities to meaningfully address medium-term fiscal challenges that will lead to an increase in the budget deficit and a growing burden of the debt, which signal downward risks to the country's solvency.

In any case, Fitch considers "a very low probability event" that the US defaults on its full and timely payment obligations on its debt securities, although it has warned that such an event would constitute "a debt default under the criteria of Fitch's sovereign rating", which would be forced to downgrade the country to 'restricted default' (RD).

However, the agency has warned that it could lower the US rating if Congress fails in negotiations to raise the debt limit before the X date, which would indicate a further weakening of governance and an inability to reaching political commitments, as well as if the US Government prioritizes debt security payments so that they are made in full and on time, but other financial obligations are not met in full in a timely manner.

The US Treasury Secretary, Janet Yellen, stated on Wednesday that it is "very likely" that the government "exhausts all its resources" in early June, which would lead the country to default.

"It is very likely that we will exhaust all our resources to meet all the obligations of the Government in early June or even as soon as June 1," he said. "We no longer see it as very feasible that our resources will allow us to reach the middle or end of June," he added.

In the United States, there is a limit set by Congress to set the amount up to which the federal government can borrow. At the moment, it is set at 31.4 trillion dollars (29.19 trillion euros), a figure that was reached on January 19 and after which the Treasury began to take extraordinary measures to avoid exceeding the ceiling.