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Britain defends cuts after negative Moody's outlook

Chancellor says weaker growth prospects for UK justify a new wave of austerity measures from his coalition government

AFP, Tuesday 14 Feb 2012
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Britain's finance minister defended his government's harsh austerity measures on Tuesday after Moody's said the country risked losing its pristine triple-A credit rating.

The influential agency downgraded the debt ratings of six European Union countries and placed negative outlooks on the top Aaa ratings of France, Britain and Austria, blaming ongoing fallout from the eurozone crisis.

The agency pointed to "materially weaker growth prospects" over the coming years for its warning on Britain.

George Osborne, the Chancellor of the Exchequer, said the assessment justified the austerity measures being implemented by the Conservative-Liberal Democrat coalition government, aimed at reining in Britain's budget deficit.

"What this credit ratings agency is warning us of today is very clear," he told BBC radio.
"They say Britain's rating would be downgraded if there was a reduced political commitment to dealing with our debts, if there was any extra discretionary spending or borrowing.

"If you don't have confidence in a country's ability to pay its debts, as you have seen with plenty of other European countries, then you get negative growth, rising unemployment, and no prospect of recovery.

"That is precisely why I don't see this false choice between growth and dealing with your debts."

Britain's biggest employers' group slashed its annual growth forecasts on Monday, blaming the eurozone debt crisis, though it predicted that the economy would narrowly avoid sliding into another recession.

The Confederation of British Industry (CBI) said it expected the economy to expand by 0.9 per cent in 2012 and by 2.0 per cent next year, and warned the outlook remains subdued due to the eurozone crisis.

Britain's main opposition Labour party, from whom the current administration inherited a record deficit in 2010, said the coalition was damaging the recovery by slashing public spending and raising taxes too quickly.

"The message is plough on, dig a deeper hole," said Labour's finance spokesman Ed Balls. "It's time people said this isn't working."

Britain and France were locked in a war of words in December after the head of the French central bank suggested Britain deserved to lose the treasured AAA rating.

France lost its own AAA rating from Standard and Poor's last month.

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