Washington’s drawn-out budget standoff has prompted Scope Ratings to trim the US’s credit grade by one notch. The European agency, which had earlier cautioned of the risks of a spending impasse, has assigned the US an AA- rating, three rungs down from its top score.

Scope commented, “Sustained deterioration in public finances and a weakening of governance standards drive the downgrade.” 

Scope first changed its outlook on the US to negative in 2023

The Berlin-based company noted that the falling governance standards are only reducing the consistency of US policymaking and making it harder for Congress to confront long-term debt problems.

Its grade is two notches lower than those assigned by the biggest peers, Fitch, Moody’s, and S&P Global. It’s one of the handful of five agencies that the European Central Bank uses as collateral valuation points and is the only one based in Europe.

Even before the government shutdown, the US had been struggling to maintain its high credit rating. Moody’s downgrade in May this year meant the country lost its last remaining top credit score among the big three rating firms.

Moody lowered the US 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, Moody attributed the change to its deepening concern over the nation’s ballooning debt and deficits.

It explained: “While we recognize the US’s significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics.” 

In its latest outlook, the International Monetary Fund estimated that the US 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 first flagged potential pressure on the US rating in 2023, maintaining a negative outlook since. Eiko Sievert, the assessor’s lead analyst for the US, at the start of October, had cautioned that the fiscal standoff was hurting credit sentiment and that the likelihood of a politically induced default, though small, was creeping up.

The White House has yet to speak on Scope’s recent evaluation change

The decision by Scope has so far won approval from Moritz Kraemer, who was once S&P Global’s top sovereign ratings officer and led the agency’s 2011 downgrade of the US. He said it reflected courage and fairness in highlighting the erosion of US governance.

The White House has yet to issue a direct formal response to the rating assessment. Though with Moody’s cut in May, the Trump administration had suggested the move was politically motivated. Steven Cheung, speaking for the White House, particularly aimed at Mark Zandi of Moody’s Analytics on X, saying he had been a long-standing critic of Trump’s policies.

Cheung had argued that Zandi’s work was widely dismissed since he had been proven wrong repeatedly in the past. That’s even though US Treasury Secretary Scott Bessent had earlier acknowledged that the US debt numbers were approaching perilous levels, warning that a crisis would halt the economy and lead to a loss of credit. There’s no telling how the administration will respond to Scope’s recent assessment, though, judging from past actions, it may choose to reassure the public about the country’s economy, pointing to positive economic data.

Get $50 free to trade crypto when you sign up to Bybit now