Obama seals US austerity bill, but markets anxious

WASHINGTON: The US debt mountain undermined financial markets Wednesday despite President Barack Obama signing a major austerity bill which raises the borrowing ceiling and averts default.

Credit rating agencies said they were still keeping a watchful eye on the ability of the United States to cope with its debt.

Global stocks fell under the twin pressures of lingering concern about the long-term health of the US economy, and a sharp resurgence of the debt crisis in the eurozone despite a package of emergency measures two weeks ago.

Obama cautioned Tuesday that the contentious US plan was "just the first step" on a long road to economic recovery,

But in a sign that the economic headaches were far from over for Washington, Chinese rating agency Dagong said Wednesday it had downgraded the US credit rating after the debt ceiling for the world's biggest economy was raised.

In a castigating review of US efforts, China's official Xinhua news agency on Wednesday also warned the 11th hour deal had "failed to defuse Washington's debt bomb for good," while it mocked the drawn-out negotiations between Republicans and Democrats as a "madcap farce of brinkmanship."

The measure sent to Obama by deeply polarized lawmakers lifts cash-strapped Washington's $14.3 trillion debt limit by up to $2.4 trillion while cutting at least $2.1 trillion in government spending over 10 years, a step forecast to drag down already sluggish US growth.

"It's an important first step to ensuring that, as a nation, we live within our means," Obama said in the White House Rose Garden. "This is, however, just the first step."

Copyright APP (Associated Press of Pakistan), 2011

Copyright AFP (Agence France-Presse), 2011