LONDON (Reuters) - The biggest threat to Britain's sovereign debt rating is uncertainty about whether the economy will return to sustainable growth in the next couple of years, ratings agency Fitch told Reuters on Monday.
Fitch stripped Britain of its top-grade AAA rating on Friday, but unlike rival Moody's - which did the same in February - it gave the new rating a stable outlook.
"The biggest question mark that continues to hang over the UK is the economic recovery," Fitch analyst David Riley said in an interview with Reuters Insider television.
He said the credit rating agency forecast British growth would return to near its long-run average in 2014 and 2015, so that the country would avoid Japan's fate of more than a decade of stagnation.
"If it's more of a Japan scenario, then the UK rating would come under pressure again. But from our perspective it is too early to make that call," he added.
Britain's pace of deficit reduction is under sharp scrutiny from critics - including the International Monetary Fund - who say it may be damaging growth unnecessarily.
But in a separate interview with Reuters on Friday, Riley said Britain's austerity was not excessive compared with elsewhere in Europe.
On Monday, however, Riley indicated that countries in the euro zone could benefit from looser fiscal policy.
"An easing of those (euro zone) deficit reduction targets to make them more sensible - more realistic, frankly - would be a positive development," he said.
"There is a fundamental challenge that Europe faces and in terms of the euro zone crisis, which is to try and secure a broad-based recovery," he added. "At this point in time it's very hard to see where that broad-based recovery is going to come (from)."
Riley also said Italy would benefit from a temporary 'grand coalition' which could agree voting reforms that would lead to a more stable, lasting government after a new election.
Reporting by David Milliken and Olesya Dmitracova; Editing by Catherine Evans