Proposed by the Obama budget is marginally positive for the credit rating of U.S. in the short term, but “almost no chance Congress to approve it without major repairs, says Moody’s Investors Service. In the long term budget proposal offers no solution to the key structural problems of social programs and pensions, says Stephen Hess, senior analyst at Moody’s. Adequacy of estimates in the plan are also in question, he said.
“These weaknesses, combined with the still high debt levels are an indicator that will require additional measures to improve government finances and debt position in the long run,” says Hess. The credit agency, which recently warned of increasing probability of placing a negative outlook to the rating of the U.S. which is currently the highest possible – AAA, noted that this year’s projected budget deficit of 10.9 percent of gross domestic product ( GDP) of the country is the most serious since World War II and is largely a consequence of extending the tax incentives introduced by former U.S. president George Bush. It is however an open question whether the government will raise taxes for the rich since 2012, the expiry of the current tax relief. The credit agency questioned some projections included in the draft, particularly for discretionary government spending except for national security, which the administration will decrease by 11% in nominal terms in 2021.
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The Prime Minister of Greece George Papandreou has denied speculation that the country must be saved with a loan from the European Union. Thus he denied rumors that the union will pour substantial sums to help countries in the fight against serious and crisis. In recent days in the French press, there have been allegations that Brussels is considering a rescue operation to help Greece. The reason is the volatility of the euro, which is largely due to precisely the problems of our southern neighbors. According to Papandreou, however, are all “speculation” and not true. He threw the blame for the problems that face his country and the euro on speculators who wager against the single currency. For this purpose we use a country with difficulties, as is now Greece. They become subject to powerful lobbies and carried out an attack against the currency throughout the euro area, transmits Air Force. Papandreou, however, acknowledged that his country has itself to blame for budget problems there. Therefore not be addressed criticism nor the EU nor the politics of the European Central Bank.
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The British finance minister Alistair Darling is expected next month to revise downwards its forecast for the presentation of the British economy in 2009. It will do so in the economic report to parliament before the budget discussions for next year, transmits Reuters. Sources from the British finance ministry have shared before the Agency on Thursday that an unexpectedly strong decline in first quarter will likely lead to a contraction of the economy by about 4.75 percent for the year instead of a set in drafting the budget 3.5%. The estimate to restore growth at the end of the year will not be changed. British economy decreased in 6 consecutive quarters, forming the most prolonged recession of at least 50 years, lagging behind other leading economies, are already restored. Reuters sources are moderately cautious in their expectations out of the recession around the end of the year, based on a recent survey by the British Union of Industrialists and data on retail sales in October. “We assume that the economy will show growth of around 0.2% -0.4% in the last quarter,” said a source from the ministry. Darling himself hinted in bringing down its forecast last Thursday, when he declared in parliament that his original forecast was in line with most experts when drafting her. “Since then, new data showed that most economies, including ours, have suffered a serious blow in the first quarter,” the minister said.
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