Allies and critics of President Obama are already pointing fingers over the credit rating downgrade by Standard & Poors.
House Speaker John Boehner, R-Ohio, who clashed with Obama repeatedly during the recent debt ceiling dispute, attributed the downgrade to government spending.
"Unfortunately," Boehner added, "decades of reckless spending cannot be reversed immediately, especially when the Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground."
Senate Majority Leader Harry Reid, D-Nevada, echoed Obama's call for a "balanced" debt reduction plan, including more tax revenues from wealthy Americans -- a step blocked by Republicans during the recent debate over raising the $14.3 trillion debt ceiling.
"The action by S&P reaffirms the need for a balanced approach to deficit reduction that combines spending cuts with revenue-raising measures like closing taxpayer-funded giveaways to billionaires, oil companies and corporate jet owners," Reid said.
The downgrade of the credit rating -- from AAA to AA-plus -- now puts a premium on the special congressional committee assigned to find $1.5 trillion more in debt reduction over the next decade.
Republican presidential candidates are also weighing in on the downgrade -- pointing the finger straight at Obama.
"America's creditworthiness just became the latest casualty in President Obama's failed record of leadership on the economy," said former Massachusetts Gov. Mitt Romney. "Standard & Poor's rating downgrade is a deeply troubling indicator of our country's decline under President Obama."
Rep. Michele Bachmann, R-Minn., -- who opposed the debt ceiling deal -- called on Obama to fire Treasury Secretary Timothy Geithner, and "submit a plan with a list of cuts to balance the budget this year, turn our economy around and put Americans back to work.
After the European markets closed, Wall Street – which had suffered a 512-point fall on Thursday in one of its worse performances since 2008 – was encouraged by remarks from the Spanish government that the prime minister, José Luis Rodríguez Zapatero, agreed with the French president Nicolas Sarkozy's desire for greater co-ordination.
Even so, the Dow Jones Industrial Average, on a day of wild fluctuations, ended just 60 points higher. Tensions were also eased after Italy's prime minster, Silvio Berlusconi, promised to accelerate austerity measures by a year, and summoned a meeting of G7 finance ministers as soon as possible.
His comments followed rumours that the European Central Bank could reverse its hardline stance and begin buying Spanish and Italian government bonds in return for quicker reforms.
Dealers have been frustrated by the lack of urgency shown by the ECB in supporting Italy and Spain. During Thursday's market mayhem, they had bought only bonds issued by Ireland and Portugal.
Amid fears of an escalation in the crisis, Mervyn King, the governor of the Bank of England, held a conference call with David Cameron and the chancellor, George Osborne – both on holiday – to discuss the impact of the financial crash on Britain's banks and the struggling UK economy. The Bank is likely to cut its growth forecast for the UK when it publishes its latest quarterly inflation report on Wednesday.
"They discussed the financial situation and the chancellor asked the governor for his judgment," a Treasury source said. "They agreed to monitor the situation."
The source said the chancellor was keeping up the pressure on eurozone leaders to carry through the terms of the second bailout of Greece, which was intended to calm the markets when announced on 21 July but has failed to do so, with concerns widening to Italy and Spain. "What we are communicating to our European counterparts is you must deliver on what you have promised," a Treasury source said.
The US jobless rate went down from 9.2% to 9.1%. Analysts said the increase in non-farm payrolls was bigger than the 85,000 jump expected by Wall Street, but the figures were not good enough to make traders feel less gloomy about the possibility of a global double-dip recession.
Glenn Uniacke, senior dealer at Moneycorp, said there was relief at the US jobs figures. "With employment growth in the world's top consumer market an indicator of the future strength of the global economy, today's non-farm payroll figures gave the markets a modest upside surprise and President Obama some short-term reprieve following the blood-letting of the past week," he said.
"However, the data won't stop the rot and is not sufficient to change the bearish outlook from traders, with a sustained figure of 200,000-plus needed for any major positive impact on the unemployment rate. The markets were seen swinging wildly straight after the data, unsure how to interpret the ray of light in an otherwise gloomy week."
The British economist Baroness Vadera, a former Labour minister and G20 adviser who played a role in devising a rescue package for the international banking system at the time of the 2008 crash, said the current crisis could be even worse.
She told BBC Newsnight: "It feels as scary, but it is different. The reason it is potentially worse is that governments stepped in all over the world and saved the banking system in order to save their economies, but now who is going to step in to save governments?
"When we went into that crisis, interest rates were quite high, so we did have monetary policy to use as a tool and now we are at the outer limits of that. Lastly, we are currently facing quite a lot of inflationary pressures, particularly coming from commodities and emerging markets, so our room for manoeuvre is a lot more limited.
No comments:
Post a Comment