British Prime Minister David Cameron says that his government needed to slash the deficit "further and faster" after Moody's ratings agency stripped the country of its cherished top-level AAA credit rating.
The comments sparked fresh speculation that finance minister George Osborne could announce more spending cuts when he unveils the coalition government's annual budget on March 20.
"This credit rating does matter and it demonstrates that we have to go further and faster on reducing the deficit," Cameron told lawmakers in his first comments on the topic since the agency axed Britain's top credit assessment late last Friday.
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Moody's downgraded Britain by one notch from AAA to Aa1, arguing that government debt was still mounting and that growth was too weak to reverse the trend before 2016.
The leader of the opposition Labour party, Ed Miliband, described the downgrade as a "humiliation" for Cameron, whose Conservative-led government had made safeguarding the triple-A rating a key test of its economic policy.
The Labour party has consistently argued that the coalition was cutting too hard and too fast, thereby choking off the recovery.
However, Cameron argued Wednesday that the Conservative-Liberal Democrat coalition was clearing up the record deficit that was "racked up" under the previous Labour government.
"The decision of the ratings agency is a reminder of the debt and the deficit problem that this country faces, and frankly it is a warning to anyone who thinks we can walk away from it," Cameron said in his weekly question-and-answer session.
"It is absolutely vital that we continue with the work of this government that has cut the deficit by a quarter, that has a million extra private sector jobs and has interest rates at record low levels."
The premier's official spokesman meanwhile played down the significance of his remarks on Wednesday.
"We have been clear ... that the period of fiscal consolidation has been extended," his spokesman said. "That's what the Prime Minister was referring to."
In a budget update in December, Osborne had warned Britons that they faced an extra year of austerity measures.
Chancellor of the Exchequer Osborne said Britain would face spending cuts and tax hikes until 2018 -- after the government had already previously extended the programme by two years to 2017.
Wednesday's comments came after official data showed that the economy grew by an upgraded 0.2 percent last year. That beat the previous estimate of zero growth but was below the government's forecast of 0.8-percent expansion.
The Office for National Statistics also confirmed that the economy shrank by 0.3 percent in the fourth quarter of 2012. Another contraction in the current first quarter would place Britain back in its third recession since the 2008 global financial crisis.
