Citing Washington’s drawn-out budget standoff, ongoing fiscal deterioration and declining governance standards, European credit rating agency Scope Ratings has downgraded America’s credit rating by one notch.
The Berlin-based agency has cut both the United States local and foreign currency long-term issuer and senior unsecured debt ratings from AA to AA-, two notches lower than those assigned by the biggest peers, Fitch, Moody’s, and S&P Global.
The downgrade follows the partial U.S. government shutdown on October 1, triggered when lawmakers failed to reach a funding agreement before the 30 September end of the fiscal year.
But well before the government shutdown, the U.S. had already been struggling to maintain its high credit rating.
The decision by Moody’s to downgrade in May this year saw the country lose its last remaining top credit score among the big three rating firms.
Moody lowered the U.S. credit assessment to Aa1 from Aaa, matching Fitch and S&P Global in placing it below the top-tier triple-A category.
At the time of Moody’s downgrade, the rating agency attributed the change to its deepening concern over the nation’s ballooning debt and deficits.
“While we recognise the US’s significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s explained.
Meanwhile, Scope Rating has simultaneously upgraded the outlook on the U.S. from negative to stable.
Having first changed its outlook on the U.S. to negative in 2023, Scope noted that falling governance standards are not only diminishing the consistency of U.S. policymaking but also making it harder for Congress to confront long-term debt problems.
Scope believes persistently large budget deficits and rising interest expenses are ratcheting up the nation’s debt-to-GDP ratio.
In its latest outlook, the International Monetary Fund estimated that the U.S. gross debt will reach 140% of GDP by 2029, up from 125% in 2025, exceeding the levels of even Europe’s most indebted nations, including Italy and Greece.
Scope initially flagged potential pressure on the U.S. rating in 2023, maintaining a negative outlook since.
At the start of October, Eiko Sievert, the assessor’s lead analyst for the U.S., warned that the fiscal standoff was hurting credit sentiment and that the likelihood of a politically induced default, though small, was becoming more prevalent.
The agency also noted that extended tax cuts and a high proportion of mandatory spending are limiting near-term budget flexibility.
Scope further warned that power concentration in the executive branch and a highly polarised Congress, often paralysed by political deadlock, threaten policy consistency and raise the likelihood of fiscal errors.
Meanwhile, the decision by Scope to downgrade the U.S. credit rating has so far won approval from Moritz Kraemer, a former S&P Global’s top sovereign ratings officer, who said it reflected courage and fairness in highlighting the erosion of U.S. governance.
While the Trump administration maintained that Moody’s cut in May was politically motivated, it has yet to issue a direct formal response to Scope’s rating assessment.
It remains unclear how the Trump administration will respond to Scope’s recent assessment, but, judging from past actions, it may choose to reassure the public about the country’s economy by pointing to positive economic data.
