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U.K. In Danger Of Losing AAA Credit Rating

A number of U.S. companies have seen their credit rating downgraded during this recession, now in its 17th month.

But today an entire nation -- the government of the United Kingdom -- now stands in danger of losing its blue-chip credit rating for the first time ever.

Standard & Poor's lowered its outlook on the U.K. from "stable" to "negative" and said the former empire now stands a one-in-three chance of having its ratings cut, which means its cost of raising new money would go higher.

The problem here is Britain's national debt: It is now approaching 100 percent of GDP. By comparison, the U.S. national debt now stands at 70.4 percent of GDP, according to the International Monetary Fund, a figure many economists find troublingly high. (It's higher if you include unfunded liabilities, such as Social Security and Medicare.)

Britain has already found a tepid response to its debt offerings. In March, the government suffered a failed debt auction -- not enough buyers for its gilt-edge bonds.

During World War II, as the U.S. government sold bonds to fund the war effort, the national debt soared to more than 120 percent of GDP.

It's a little tough to compare the U.K. and U.S. economies, because the size difference is so great between the two. Four other relatively small economies -- Ireland, Greece, Portugal and Spain -- have already lost their AAA rating.

-- Frank Ahrens
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By Frank Ahrens  |  May 21, 2009; 11:24 AM ET
Categories:  The Ticker  | Tags: IMF, Standard & Poor's  
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