The markets have been roiled recently by the debt ceiling debate, the potential debt downgrade of the U.S., and the likely new recession that will come from the austerity measures. For now, the U.S.’s triple-A rating appears to be secure, but only temporarily. When we last covered the full list of nations that still have triple-A ratings from key credit rating agencies our point was simple: there are some strong triple-A nations and some weak triple-A nations. As of today, there are many more weak triple-A ratings than there were just six months ago.
Moody’s has already affirmed the U.S. government’s Aaa rating, but with a negative outlook. Fitch also affirmed its AAA rating for the U.S., but warned that the rising debt profile to over 100% of GDP (after 2012) is not consistent with retaining the crucial AAA sovereign rating.
As a result of the weakening economy, and following the ratings agency actions, 24/7 Wall St. has decided to reassess the entire global triple-A landscape. Our previous take was that some nations already seemed to be far less deserving of the triple-A rating category than others. The key assumption here is that the U.S. is no longer a true triple-A- rated nation. This implies that other nations with similar conditions are also at risk of losing their triple-A rating, and that there are really far fewer than 17 true nations in the triple-A club now. Our review includes updated figures from Standard & Poor’s and Moody’s along with revised statistics from the CIA World Factbook. We’ve sourced also from the Economist Intelligence Unit, Fitch, Egan Jones, and elsewhere.
S&P still has a triple-A rating on Australia, Austria, Canada, Denmark, Finland, France, Germany, Netherlands, Norway, Singapore, Sweden, Switzerland, the United Kingdom, and the United States. Other triple-A nations like Guernsey, Isle of Man, Liechtenstein, and Luxembourg we left out due to their small size and dependence upon other nations. Moody’s ratings were also used to make sure that the discrepancies are not overlooked.
The writing is on the wall. The U.S. can still count itself as a triple-A nation, but not indefinitely and not even for too much longer. Even the newly agreed debt-ceiling deal will not keep a downgrade from coming at some point in the intermediate-term if the hints from the ratings agencies are serious. Keep in mind that Japan lost its AAA rating in the late 1990s. It was further downgraded earlier this year. It was as recently as 2009 that S&P cut Ireland’s AAA rating. Italy and Spain were both AAA rated in the 1990s, but Spain was actually raised back to AAA before losing it again in 2009.