By Yali N’Diaye

WASHINGTON (MNI) – Should the Obama administration extend the Bush
era tax cuts for the wealthiest for an additional year — in addition to
the extension so far considered only for the middle class — that is
unlikely to change credit rating agencies’ analysis of the U.S.
sovereign creditworthiness.

Asked if such a move by the administration would be enough to
change the outlook for the U.S. sovereign rating, both Fitch Ratings and
Standard & Poor’s referred to their latest respective outlooks, standing
by it.

“The U.S. government remains exceptionally creditworthy,” Fitch
Ratings said in its January rating report on the U.S., the most recent.

It added, “significant structural fiscal policy tightening will be
needed over the next three to five years to avoid government
indebtedness approaching levels by the latter half of the decade that
would bring pressure to bear on the U.S. ‘AAA’ status.”

Fitch estimates that public debt on a general government basis is
expected to rise to 89% of GDP this year and 94% in 2011 from 79% of
GDP in 2009, “which would mark the highest level among ‘AAA’-rated
sovereigns.”

At Standard & Poor’s, a spokesman also repeated the agency
currently has a stable outlook for the U.S.

Still, credit rating agencies are watching for signs of budget
consolidation in the U.S.

So a move from the Obama’s administration to extend the tax cuts
initially implemented by the Bush administration to the wealthiest would
definitely not be among the signs the rating agencies are looking for.

Earlier in August, Moody’s said the U.S. was among some major
countries — the United Kingdom, France and Germany — whose “distance
to downgrade has been further reduced” in light of their ongoing fiscal
challenges.

That said, those countries remain “well positioned based on a
forward-looking assessment of their debt dynamics and debt
affordability,” Moody’s added in its “Aaa Sovereign Monitor.”

“In the U.S., a strategy for debt stabilization is still in the
early stages of being developed,” said Alexander Kockerbeck, Vice
President and Senior Credit Officer in Moody’s Sovereign Risk Group.

** Market News International Washington Bureau: 202-371-2121 **

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