Even though it is impossible to raise any fundamental objection to the agency's downgrade, with new US federal borrowing accounting for around 10% of GDP and the country's debt level sitting at more than 90%, the timing of the announcement, in the midst of the recent market turbulence, is incomprehensible. We do not believe that the political compromise on the lifting of the debt ceiling goes hand-in-hand with any negative change in the outlook for US state finances. Although the announced consolidation plan is anything but a long-term solution and remains vague in many respects, it would have been difficult to expect anything else given the political differences of opinion involved. At least we now have a clear consensus among US policymakers on the need for consolidation.
The most recent wave of turbulence once again shows how vulnerable the international financial system is at the moment. There is a pressing need for greater international political coordination both between, and within, the world's major economic regions. In this respect, while the statement by the G7 is to be welcomed, it can only be the first step in a longer process. We cannot allow the additional prosperity that globalization has brought to be frittered away again as a result of turbulence and inefficiency on the financial markets.