As Washington raced to finalise its last-minute budget deal that would prevent an imminent US debt default, investors fretted that not enough had been done to ensure that the United States retained its precious triple-A rating.

Washington’s budget compromise involves $2.4 trillion in deficit cuts over the next decade, but ratings agency Standard & Poor’s has previously indicated that budget cuts of about $4 trillion were necessary to stop US debt levels from continuing to climb.

On Friday, ratings agency Moody’s Investors Service indicated that it would likely confirm the country’s triple-A rating, although it was likely to shift its outlook to negative. However, Standard & Poor’s has only said that it is continuing its review of the US triple-A rating.

Investors are worried that a US debt downgrade could roil financial markets. In an interview with French newspaper Le Figaro, Eurogroup chairman Jean-Claude Juncker warned of global repercussions from a downgrade. “One can’t talk about regional financial crises, as before,” he said. “It’s the same phenomenon that’s hitting everywhere, at the same time. The debt crisis is combining with a banking crisis, the foundation of confidence is shaken.”

Asked about the possibility of the US losing its triple-A rating, Juncker replied: “We’ve never seen a country of the size and nature of the United States lose the top rating. It’s clear that such a decision from the ratings agencies would add distrust to an already perceptible lack of confidence. And it would be surprising if the rest of the planet, Europe in particular, escaped the repercussions.”

Fears that the US could be downgraded were fuelled by a Financial Times opinion piece written by economists Carmen Reinhart, from the Peterson Institute for International Economics, and Vincent Reinhart, from the American Enterprise Institute, that argued that the latest Washington compromise is only a temporary ceasefire which “will not address the country’s longer-run problems”.

As a result, they said, “the ratings agencies are therefore justified in reconsidering America’s triple-A credit rating”.

They argued that the arithmetic in the latest budget deal remains slippery. “Most of the spending cuts are to be decided later. They also rely on the untested mechanisms of a new committee, tasked with agreeing a package of cuts, with the threat of across-the-board cuts in entitlement programs if it fails.”

Even worse, they said, the latest agreement fails to deal with the US government’s indebtedness, which stretches well beyond the $14.3 trillion debt ceiling.

Meanwhile, others are concerned that the latest budget deal will further weaken the faltering US economy. Having missed a chance to make sizeable budget cuts when the US economy was strong, and asset prices were surging, Washington must now rein in spending at a time when the economy is weak, and unemployment remains stubbornly high. Concerns that the US economy could be about to fall back into recession were fuelled by weaker than expected manufacturing data released overnight, which showed the weakest pace of expansion in two years.

At the same time, global markets remain conscious that the eurozone debt crisis is far from over. Investors are increasingly worried about Italy, which has a debt-to-GDP ratio of 120%. Investors sold off Italian bonds overnight, pushing the yield on 10-year bonds to 6.04%, a new euro-era high, while Italian bank shares were pummeled. Shares in UniCredit, Italy’s largest bank in terms of assets, closed down 4%, while the share price of Intesa Sanpaolo, Italy’s largest retail bank, fell 7.8%. The largest Italian banks have seen their share prices drop more than 20% this year, even though they performed strongly in the latest eurozone bank stress tests.

*This first appeared on Business Spectator.