GLOBAL - France, Germany, the UK and US must rein in their pension and health care expenditure if they are to stabilise their debt in the long term, a report by Moody's warns.
The ratings agency said the four largest AAA-rated countries will face dramatic debt increases under their existing policy commitments due to ageing populations.
"Future costs must be brought under control if these countries are to maintain long-term stability in their debt burden credit metrics," Moody's said. "In the absence of reforms, the fiscal costs of national pension plans will...pressure the creditworthiness of these countries."
The agency said in terms of shot-term strategy, the US has constructed a programme of additional stimuli, while the UK's coalition government has introduced a strong programme of deficit reduction in order to address the steep increases in government debt. Germany and France have also recorded debt increases but have moved toward deficit reduction - France less aggressively so than Germany.
According to Moody's AAA Sovereign Monitor, fiscal metrics for Australia and Singapore are among the strongest of AAA-rated sovereigns, with Australia expecting to report one of the lowest debt levels in the category. Singapore's debt is higher, but is forecast to record the fastest growth rate in Asia for 2010. Although New Zealand's debt position is "favourable", its near-term trajectory shows a further rise in its debt ratios before a reversal is achieved, Moody's said.
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