Britain clings to deficit-cutting drive despite AAA loss

LONDON (AFP) - British finance minister George Osborne insisted Saturday that he would not abandon his deficit-cutting drive after Moody's stripped the country of its coveted triple-A debt rating.

The opposition lashed Osborne, saying his plan for the economy was shot through, while analysts said that although it was an embarrassment for him, the downgrade would have a limited impact in the markets.

In an expected rebuff to London's hopes that sharp spending cuts would both gradually eliminate the deficit and revive growth, Moody's rating agency cut Britain's grade by one notch to Aa1 on Friday.

Osborne said it was a "loud and clear message that Britain cannot let up in dealing with its debts, dealing with its problems, cannot let up in making sure that Britain can pay its way in the world.

"What is the message from the ratings agency? Britain's got a debt problem.

I agree with that. I've been telling the country for years that we've got a debt problem, we've got to deal with it.

"What do they also say? That if we abandon our commitment to deal with that debt problem, then our situation would get very much worse and I'm absolutely clear that we must not do that."

Asked if he had broken his commitment to protecting Britain's credit rating, he said the true test of credibility was whether Britain could borrow money.

"At the moment we can do that very cheaply with very low interest rates precisely because people have confidence that we have got a plan," he said.

Moody's said government debt was still mounting and that growth was too weak to reverse the trend before 2016.

It described the British economy as constrained both by turgid global growth and the drag from businesses and the government rapidly slashing their debt burdens.

Calling it a "humiliating blow", Labour opposition finance spokesman Ed Balls said Osborne had failed in his chief stated mission of retaining Britain's AAA status.

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