Although Standard & Poor’s had telegraphed for months and a credit rating reduction for the U.S. might be inevitable, the news of the actual downgrade on Friday caught many foreign officials off guard.
European government ministers, who are already deeply embroiled in their own deepening debt crisis, were particularly taken aback by the downgrade of the rating of the most powerful economy on earth.
François Baroin, France’s finance minister seemed to agree with Barack Obama’s administration that S&P has wrongly overstated the size of the federal government’s debt by an astounding $2-trillion.
Baroin also said he found it strange that the two other principal credit ratings agencies, Moody’s Investor service and Fitch Ratings, are keeping their pristine AAA rating for the U.S.
“We have total confidence in the solidity of the American economy,” Baroin told French radio.
According to The New York Times, one European official said about the downgrade: “We all feel the consequences of the crisis on our public finances, and we all need to take serious action to restore their sustainability while being attentive to the strengthening of growth.”
Germany’s economics minister Phillip Rösler told the newspaper Bild am Sonntag, “It’s obvious that the competitiveness of the economies of other countries is also an important issue for us,” but declined to comment directly on the downgrade.
Curiously, the two most powerful European heads-of-state, Chancellor Angela Merkel of Germany and French President Nicolas Sarkozy have issued no statements on the downgrade.
German media viewed the downgrade as a reflection of the U.S. long-term decline in global affairs.
The newspaper Die Welt called the downgrade a “thunderbolt” and praised S&P for its “bravery” in making the downgrade.
“This is not Spain or Ireland,” Die Welt wrote. “This is the debtor nation U.S.A., that in contrast to other countries has always fulfilled its obligations.”
Focus, a German magazine, referred to the decision as “a public humiliation.”
Citing that Chinese government officials [who own the largest portion of U.S. government debt] have excoriated Washington for its profligate ways, Focus wrote: “Now the [U.S.] must allow itself to be reprimanded and lectured before the eyes of the world.”
Indeed, China’s state news agency bitterly wrote: "China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets. International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country."
South Korea reacted more mildly. According to the Yonhap news agency, Yoon Jong-won, head of the finance ministry's economic policy bureau, stated: "The news is bad and Seoul plans to keep very close tabs on how the market reacts.”
However, Julia Gillard, the prime minister of Australia, was somewhat more circumspect about the sudden downgrade.
“[S&P] had been signaling for some time that unless they saw a certain figure of budget cutbacks out of the discussion that there’s been in Washington about the American budget and fiscal consolidation, that they were intending to do that downgrade,” she said, according to Agence France Presse.
An anonymous official of the Japanese government, which is the second largest holder of U.S. debt, said he had no problems with trusting the value of US Treasuries.
Perhaps surprisingly, Russia said that the modest one-notch cut in US debt rating “can be ignored.”