Austerity Doesn’t Pay as Debt Markets Ignore Rating Cuts
By John Detrixhe, Zeke Faux and Katie Linsell - Jun 18, 2012 7:45 PM ET
Britain is forcing Stephen Jobling and his stroke patients to defend the nation’s AAA credit rating.
Staffing at the National Health Service hospital ward where Jobling works was reduced by about half in the U.K.’s deepest drive since World War II to shrink its deficit. The goal was to avoid losing the top credit score, which might risk higher interest expenses, according to the government of Conservative Prime Minister David Cameron.
“If they could see these people suffering while we have two members of nursing staff running round trying to wash, dress and feed 20 patients, they would think twice,” says Jobling, 27, a nurse at Lincoln County Hospital in eastern England. “You should be looking after your people. You shouldn’t be bothering about some credit agency from somewhere else.”
The bond market says he’s right. After Moody’s Investors Service issued a “negative” outlook for U.K. debt on Feb. 13, yields on government securities relative to benchmark U.S. Treasury debt fell over the next month, instead of rising.
“I don’t think we should be slaves to the ratings agencies,” Mervyn King, governor of the Bank of England, told lawmakers on Feb. 29. “What we’ve seen is, the action they took recently did actually have no impact on the yield that people in the market were willing to lend to the U.K. government at.”
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