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Moody’s Lowers UK Credit Rating. Is Cameron In Trouble?

The UK economy has been dealt another blow, as Moody’s Investors Services downgraded the UK from its triple-A credit rating—which it had held since 1978—to one notch below, at Aa1.  The WSJ reports:

The Moody’s decision was based on “the increasing clarity that, despite considerable structural economic strengths, the U.K.’s economic growth will remain sluggish over the next few years,” Moody’s said. “The country’s current economic recovery has already proven to be significantly slower… Moody’s believes the risks to the growth outlook remain skewed to the downside.”

David Cameron’s coalition government is in a bind. The UK may soon face its third recession in four years, and time is running short before the next election. Cameron and his chancellor of the exchequer, George Osborne, have been trying to rejuvenate the UK economy since taking office in 2010, calling for difficult government spending cuts in order to preserve the UK’s triple-A rating.

Their failure to do so has played right into the hands of the opposition. Shadow chancellor Ed Balls jumped at the opportunity to call the downgrade a “humiliating blow” to the UK leadership. And Labour leader Ed Miliband, whose star has been ascendant lately, will surely benefit: the Economist reported earlier this month that Labour was already polling better than the Conservatives on the economy.

Moody’s labeled the UK economy as stable, but predicted that its debt burden won’t be reversed until 2016—a timeframe that might be too little, too late for the UK leadership.

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