Fitch’s quarterly survey found that 82% of the region’s fixed-income investors believe the US will not go over the edge of the fiscal cliff, which is $600bn of tax increases and spending cuts that come into force on 1 January 2013.
Some 10% of European fixed-income investors expect the cliff will be avoided and ultimately prove to be of little concern. However, 5% think it could cause a recession in the world’s largest economy.
Fitch warned that the fiscal cliff is creating the risk of “an unnecessary and avoidable recession". It also claimed the unemployment rate would rose to above 10% next year if the US went over the cliff.
The ratings agency added: “Fitch believes the fiscal cliff and an increase in the debt ceiling are pressing issues that the president and Congress must address in the coming weeks if the US is to avoid a fiscal and economic crisis.”
Should US policymakers fail to reach even a temporary arrangement to prevent the tax increases and spending cuts from being implemented, the country would be at risk of losing its AAA credit rating, the agency concluded.