(Reuters) -European rating agency Scope downgraded the United States’ credit rating by a notch on Friday, citing sustained deterioration in public finances and a weakening of governance standards.
Scope cut the U.S. local and foreign currency long-term issuer and senior unsecured debt ratings to “AA-“, from “AA”, but revised the outlook to “stable” from “negative”.
The downgrade comes weeks after the U.S. government shut down much of its operations on October 1, as Republicans and Democrats failed to reach an agreement to extend funding past the end of the federal fiscal year on September 30.
The agency pointed to persistently high federal deficits and rising interest payments as key drivers behind the growing public debt-to-GDP ratio, which it expects to reach 140% by 2030 — a level well above most sovereign peers.
“The extension of previous tax cuts and the high share of mandatory spending constrain budgetary flexibility in the near term,” Scope said.
Consolidation of power within the executive branch, coupled with a polarized Congress often caught in legislative gridlock, undermines policy stability and increases risks of missteps, Scope added.
Berlin-headquartered Scope, however, revised its outlook to “stable” from “negative”.
(Reporting by Pritam Biswas in Bengaluru; Editing by Alan Barona)
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