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Cameron plays down status of top credit rating

DavidqwLONDON: British Prime Minister David Cameron said the credibility of his deficit-cutting policy was more important than the judgment of credit rating agencies, as the threat of third recession since the financial crisis looms.


Britain has held onto its top triple-A credit rating while the United States and France have suffered downgrades, but that endorsement has looked increasingly shaky as the economic outlook darkens.


A loss of the rating would be a blow to Cameron and his Conservative-led coalition, which has staked its political reputation on maintaining the top rating and nursing Britain's economy back to health by cutting its deficit.


Cameron told BBC television on Sunday the opinion of the international debt markets was more significant than a credit rating.


"What matters most of all is are you able to pay your debts, maintain your debts at a low rate of interest," he said.


"The ratings you have are all hugely important, but in a way the real test is, what are the interest rates the rest of the world is demanding in order to own your debt."


Ministers have been increasingly playing down the significance of credit ratings as the economy struggles and the crisis in the euro zone, Britain's largest trading partner, reduces the near term prospects for growth.


Cameron said the key to keeping the faith of financial markets was the government's programme of cutting state spending to bring its deficit under control.


"You can only keep your interest rates low if you have a credible strategy for getting on top of your deficit and getting on top of your debt," he said.


Britain has seen the interest rate on its government debt fall to extremely low levels, thanks in part to the Bank of England buying 375 billion pounds ($601 billion) of the debt, while rates have soared in euro zone countries like Greece, Spain and Portugal.


Cameron said it was important the Bank of England kept interest rates low to help companies expand and help the housing market, but dismissed a suggestion that the bank's incoming head Mark Carney had been hired to inject a dose of inflation into the economy.


"Right now Britain needs low interest rates because we need businesses to get out there and invest. It lets people get onto the housing ladder. So we want to maintain a situation where low interest rates are possible," he said.


Data on Friday suggested Britain's economy may have shrunk in late 2012, raising the chances of the country sinking back into its third recession since the 2008-09 financial crisis.


Last month rating agency Fitch said Britain's credibility had been damaged by government forecasts that it would not meet a key debt reduction target, and said it would review its triple-A rating later in 2013.


Center>Copyright Reuters, 2013


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