Ireland’s credit rating is cut - again

[mawilson 2,133]

The Irish Republic’s credit ratings were cut for the second time in three months on Monday

amid rising worries over the cost of bailing out the country’s banking sector.

Standard & Poor’s reduced Ireland’s long-term credit ratings to double A, with a negative

outlook, from double A plus. The country lost its top triple A rating at the end of March.

S&P’s move sent Irish banking stocks plunging, hit the euro and forced up the cost of

insuring the country’s debt against default.

It puts more pressure on the coalition government of Brian Cowan, prime minister, which

faces a no-confidence vote on Tuesday after a rout in local elections and the loss of a key

seat in Dublin in the European parliament to a Eurosceptic rival.

S&P said in a statement: “We have lowered the long-term rating on Ireland because we

believe that the fiscal costs to the government of supporting the Irish banking system will

be significantly higher than what we had expected when we last lowered the rating in March.”

The cost of rescuing Irish banks may rise to as much as €25bn (£21.6bn) against S&P’s

previous forecast of between €15bn and €20bn.

S&P took its decision after the recent announcement that losses at the nationalised Anglo

Irish Banks were at the upper end of its expectations.

The agency fears the scale of the government’s bad-bank plan, in which the Irish state will

start taking on the liabilities of bank loans and assets with a book value of up to €90bn from

July, could cause national debt to surge past 100 per cent of gross domestic product next

year from about 41 per cent last year.

Allied Irish Banks and Bank of Ireland, the country’s biggest commercial banks, saw their

stock prices tumble 14.2 per cent and 11.8 per cent respectively at one point. The Irish stock

exchange closed 2.2 per cent lower on the day.

The euro fell 1 per cent against the dollar to hit $1.3803.

The cost to insure the country’s debt through credit default swaps rose by €10,000 to €224,000

for every €10m of debt. Irish 10-year bond yields were steady at 5.68 per cent, although

they underperformed German Bunds.

Rival ratings agency Fitch cut Ireland’s triple A ratings by one notch to double A plus, with a

negative outlook, in April.

In spite of the problems, analysts at Royal Bank of Scotland said Ireland was unlikely to default

on its debt obligations or turn to the International Monetary Fund for help.

link

[w¡n9Nµ7 §£@¥€r 123]

One of the most significant news items of the week, buried on page 2 with not a single reply? Shame on you, VJ.

[Ban Hammer 13,395]

One of the most significant news items of the week, buried on page 2 with not a single reply? Shame on you, VJ.

don't expect us to do your light work

[Dr. Obvious 49]

The euro fell 1 per cent against the dollar to hit $1.3803.

But now it is back up to 1.40, so I guess it wasn't that big of a deal after all.