The UK faces the prospect of a humiliating downgrading of its credit rating after Portugal suffered the fate only days ago.
Last Wednesday the Fitch agency cut Lisbon’s rating from AA to AA minus and warned that there could be more in the near future.
But fears are growing for the UK given that it is actually in worse shape than Portugal. Experts say that unless the UK deficit is reduced then it could easily suffer a financial crisis similar to that currently being experienced by Greece.
The agency Standard and Poor’s said it would delay any decision on the UK until after the election.
Both the Conservative party and Labour have been accused of failing to put forward policies that address the UK’s financial problem and have been accused of being in denial.
A good credit rating allows nations to borrow relatively cheaply and any decision to downgrade a rating can force up the cost of borrowing significantly thus making it more expensive to finance debts on the international markets.
Willem Buiter, a former member of the Bank of England’s Monetary Policy Committee, said: “Britain’s true fiscal circumstances are about as bad as Greece’s reported situation.”
Haig Bathgate, head of strategy at asset management firm Turcan Connell, said: “Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly. The UK is in a similar predicament. It could be hit very hard.”