Nov. 6 (Bloomberg) -- Governments may take as long as a decade to cut debt issuance back to the levels before global markets seized up following the collapse of Lehman Brothers Holdings Inc. last year, according to Moody’s Investors Service.

“Globally, it will take five to 10 years to return to the pre-Lehman levels of issuance,” Pierre Cailleteau, managing director of sovereign ratings at Moody’s, said in an interview in Brussels today. “We don’t see any defaults happening in developed countries but we are concerned about countries like Portugal and Greece, where there is a lack of economic vitality and some fiscal indolence. So no heart attacks there, but we could see a slow degradation.”

Governments around the world are selling record amounts of bonds to finance bank rescues and measures to haul their economies out of the recession. The International Monetary Fund this week urged nations to address their rising debt levels, warning they may lead to a surge in borrowing costs.

U.S. Treasury debt-management director Karthik Ramanathan told bond market participants this week to expect another year of government debt sales of as much as $2 trillion, minutes of the meeting showed Nov. 4. Euro-region countries will increase issuance to 980 billion euros ($1.5 trillion) in 2010, from 915 billion euros, according to ING Groep NV.

‘Lost Altitude’

“Most Aaa countries have lost a lot of altitude,” Cailleteau said. The euro region “has been protective against illiquidity risk, but there is no fix against long-term solvency risk.”

The U.S., which together with the U.K. is among the more “resilient” Aaa rated countries, is “vulnerable to a hike in rates,” Cailleteau said. “They should try to lengthen the maturities but they are not yet focused on that.”

The IMF said Nov. 3 that government debt ratios will increase by 40 percentage points by 2014 from before the crisis. The U.S. budget deficit will be equivalent to 12.5 percent of the country’s gross domestic product this year, while the U.K’s deficit will be 11.6 percent of GDP, the Washington-based lender predicted.

To contact the reporter on this story: Anna Rascouet in Brussels at arascouet@bloomberg.net

Last Updated: November 6, 2009 08:01 EST