Sunday, May 5, 2013

Austerity punks downgrade Britain's debt anyway

Sorry, I missed this story when it happened but it's still worth dwelling on because you won't hear this in the U.S. media.  Fitch's downgrade followed Moody's downgrade of Britain's sovereign debt in February.

Let me underline why these downgrades by the independent ratings agencies are so important: this is the exact consequence that advocates of austerity warned Britain to avoid, and yet austerity has made their worst nightmare come true.

For all you Tea Partyers, let me make it simpler: cutting government spending led to a weaker economy and thus higher government debt, which led to ratings downgrades.

Let me also point out the outrageous, self-serving logic of Fitch:

"The current pace of deficit reduction doesn't seem excessive," Fitch analyst David Riley said. "Other countries in Europe are cutting at a similar speed or even faster."

Translation: "As good little neoliberals, we at Fitch agree ideologically with rapid deficit reduction, but we base our ratings on actual results, which have been awful, so... take that."

That's called damned if you do, damned if you don't, folks.  It's safer to ignore the austerity punks and strive for a growing economy, because the austerity punks are fair-weather friends of budget-cutting states.

By Christina Fincher and David Milliken
April 19, 2013 | Reuters

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