What stands out here is that this view is said to echo the prior downgrade of the United States back in 2011.
The heart of the decision was said upfront to be the government’s decision to hold a referendum on European Union membership by 2017. S&P is worried that economic policy making could become more exposed to party politics than what S&P had previously considered.
S&P warned that a possible departure from the EU by the United Kingdom also raises questions about the nation’s large twin deficits and high short-term external debt.
As a result, the AAA/A-1+ rating for the Bank of England was also affirmed, but the outlook was moved down to Negative from Stable.
The iShares MSCI United Kingdom (NYSEMKT: EWU) was already lower on the day. On last look, shares of this exchange traded fund (ETF) were down 0.7% at $19.11, against a 52-week range of $17.11 to $22.11. As far as how large the ETF is, it trades over 3.2 million shares on an average day, and the iShares website indicated that its total assets currently are $3.3 billion.
Anyhow, this is not a formal downgrade of the United Kingdom. It just sure sounds a lot like what the United States went through in recent years.
Wilbur Ross described losing a AAA rating better than anyone else ever has: “Having a Triple-A rating is a lot like virginity. It’s easy lose and very difficult to get back.”
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