Obama insists US is still ‘triple-A’

WASHINGTON, Tuesday

President Barack Obama vowed yesterday that America would always be a “triple-A country,” but his bid to reassure investors could not stop stocks plunging in reaction to a historic downgrade of US debt.

President Obama said US economic woes were “eminently solvable” if politicians stopped squabbling, but Republicans immediately rejected his renewed call for higher taxes on the wealthy, raising the prospect of prolonged partisan gridlock.

The president was making his first public comments on the first-ever decision by ratings agency Standard & Poor’s on Friday to downgrade the AAA credit rating on US sovereign debt to AA+ with a negative outlook.

The agency argued that the bitter political brawling in Washington between Obama and Republicans, including the ultra-conservative Tea Party faction, could leave the United States unable to solve its fiscal crisis.

But President Obama, who has seen his 2012 re-election bid seriously complicated by the latest economic panic, countered that investors still saw the US economy as one of the safest investments in the world.

“No matter what some agency may say, we have always been and always will be a triple-A country,” President Obama said.

But he conceded that partisan feuding in Washington was hampering efforts to fix the economy, and called on all sides to unite on a “balanced” approach to ease the deficit, tipped to hit $1.6 trillion this year.

“Here’s the good news. Our problems are eminently solvable. And we know what we have to do to solve them,” President Obama said.

Huge sell-off

But the downgrade, along with wider fears about the European debt situation and global economic prospects, triggered a huge sell-off on Wall Street.

The Dow Jones Industrial Average tumbled 5.6 percent to finish at 10,809.85 in the steepest one-day drop since the financial crisis of 2008.

The broader S&P 500 fell 6.7 per cent to 1,119.46, while the tech-heavy Nasdaq dropped 6.9 per cent to 2,357.69.

Equities also plunged worldwide, with the Frankfurt market down more than 5.0 per cent, Paris down by 4.7 per cent, and London losing 3.4 per cent. In Asia, Tokyo lost 2.18 per cent, Hong Kong fell 2.11 per cent and Seoul sank 3.82 per cent.

The turmoil signalled that a deal reached last week between Republicans and Democrats to raise the US government’s borrowing authority, in return for spending cuts, will do little to quell fears about US economic prospects. (AFP)