Moody's Investors Service said on Tuesday the top AAA ratings of the United States, Great Britain, France and Germany are well positioned but face new challenges that increase the possibility of a downgrade.
The "distance to downgrade" for these four sovereigns has been reduced, the credit rating agency said in a statement, meaning their credit quality within that top category is declining.
They continue to be well positioned based on a forward-looking assessment of their debt dynamics and debt affordability, Moody's added.
"Since the last issue of Moody's Aaa Sovereign Monitor, the debate on the optimal timing of fiscal tightening has effectively been brought to a close for the largest European Aaa-rated governments, as they are now all pursuing deficit reduction measures," said Alexander Kockerbeck, sovereign credit analyst at Moody's.
"In the US, a strategy for debt stabilization is still in the early stages of being developed," Kockerbeck added.
Spain's AAA rating was put on review for a possible downgrade on June 30.
The challenges that Moody's highlighted include the need to revive growth at a time when fiscal stimuli are effectively no longer available; regaining or preserving access to affordable funding through credible medium-term fiscal adjustment programs; and the limited amount of time that governments have to confront problems such as aging populations.
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