April 26, 2012
Rating agency Standard & Poor’s highlighted how dented their confidence is in the Liberal Government’s fiscal management, by setting the credit outlook on Ontario’s debt as “negative”. S&P cited “continued weak budgetary and debt metrics” as one reason for their downgrade – they don’t find the Government’s numbers, forecasts or economic measurements credible.
Local MPP Jim McDonell commented: “Unlike Minister Duncan, who “welcomes” the news, I find it very troubling. The Liberals and NDP have just released their tax-and-spend Budget where “restraint” is $2 billion in extra spending, and counting. Tim Hudak and the PC Caucus have warned the McGuinty Government for months of the need for spending restraint and a solid growth strategy. When the Budget showed none of these, we voted against it. We believe Ontario is on the wrong path and yesterday’s warning proves it. Ontario can lead again only when our economy is strong and sound, and a balanced budget is an
essential part of that.”
The Globe and Mail reports today that a downgrade by S&P is a great risk because the agency already ranks Ontario’s debt lower than Moody’s, another rating agency. A credit downgrade involves soaring interest costs on the existing debt as creditors demand higher returns in exchange for perceived higher risks of default.
McDonell offered a perspective: “We spend over $10 billion every year to pay the interest on our existing debt, which is on track to hit $411 billion by 2017. Thirty thousand dollars owed by every man, woman and child in Ontario. It is a cost, imposed on our lifestyle, our services, our future prosperity. If we continue to borrow at a rate of $28,000 a minute, the Province of Ontario will soon be in Greece’s situation where our neighbours will be deciding what benefits we will be allowed to fund, not the future that I want to see for
our great province. If the Government continues to accumulate debt and not heed warnings from the credit rating agencies, this will become a terrifying reality for every Ontarian. The McGuinty Government’s attitude shows they do not see the urgent need to rein in their spending and get Ontario back on the path to prosperity”.
Standard and Poor’s could downgrade Ontario’s debt within the next two years if they are not satisfied the Government has made serious efforts to put their fiscal house in order.