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.....in theory is AAA, with S&P, but market traders are treating the UK as if the rating was a lot lower....
Italy, a country rated only A+ by S&P is having to pay gilt yields of 4.03%
The UK is having to pay 4.07% on government gilts.
To put it simply, the markets think that the UK at AAA is at least as high, or higher, risk as A+ Italy.
This is a hint of much greater problems to come if, after the election, the Government does not come up with an immediate start to deficit reduction.
That means cuts to services and/or higher taxes.
If the issue is not tackled immediately the costs of borrowing will soor causing the need for even bigger cuts/tax rises. This is why a start MUST be made now just as Cameron and Osborne say.
(source: Financial Times)
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