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OECD sparks bitter war of words with S&P

The Organisation for Economic Co-operation and Development (OECD) is this evening involved in a bitter war of words with credit ratings agency Standard and Poor's after a threat to downgrade the credit ratings of the UK and US. This comes after S&P recently went ahead with a downgrade of Spain's credit rating from AAA to AA+ in what they claim was a reflection of both the Spanish economy and the Spanish government's handling of the situation.

However, the OECD claims that S&P is reacting to government policies as opposed to the country's ability to repay its debt. In all honesty there is little likelihood that the US or the UK will in fact renege on any debt payments in the future but again there is no doubt that the economic situation and ballooning government budget deficits have not helped.

It is difficult to highlight the power that credit rating agencies such as S&P have over both the investment and money markets around the world. The decision to review the UK credit rating caused a significant run on the pound yesterday although the announcement of a potential downgrading of the US credit rating created a difficult situation for the dollar.

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