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Europe

Moody's rating agency downgrades Ireland's credit ranking

Text by News Wires

Latest update : 2010-12-17

Moody's Investor Service downgraded Ireland's credit rating Friday based on continuing uncertainty over the country's public finances and huge deficit. It noted, however, that the economy may return to growth based on its robust exports.

AFP - Moody's Investors Service on Friday slashed its credit rating on Ireland by five notches from Aa2 to Baa1 because of increasing uncertainties over the debt-stricken country's economy and public finances.

Moody's said the Baa1 rating outlook is negative.
             
Ireland, once known as the Celtic Tiger for its stellar growth rates, recently had to seek an €85-billion-euro ($113-billion) rescue package from the European Union and International Monetary Fund as massive debt and deficit problems left the country on the verge of collapse.
             
The Irish parliament approved the hugely controversial package earlier this week.
             
Moody's said its downgrade reflected the problems in the Irish banking system, the "increased uncertainty regarding the country's economic outlook, and... the decline in the Irish government's financial strength."
             
The negative outlook on the ratings "is based... on the risk that the Irish government's financial strength could decline further if economic growth were to be weaker than currently projected or the costs of stabilizing the banking system turn out to be higher than currently forecast."
             
On the positive side, Moody's noted the Irish economy's competitiveness and its business-friendly tax environment, while the labour market is flexible, as reflected in "the considerable wage adjustment" seen during the crisis.
             
On Thursday, figures showed that Ireland returned to growth in the third quarter thanks to robust exports, with the economy expanding 0.5 percent after shrinking 1.0 percent in the second.
             
Finance Minister Brian Lenihan said the data showed that "the economy is growing, primarily due to the very strong performance of the export sector."
             
The "figures show that the economy has stabilized and is now on an export-led growth path," he said.
              
Ireland, rocked by bank bailouts, a property market meltdown and recession-ravaged tax revenues, has unveiled draconian measures to slash its huge public deficit and save 15 billion euros by 2014.
             
Its international bailout, just seven months after a similar rescue of Greece, comes amid heightened tensions over the eurozone debt crisis and as EU leaders meet for a second day Friday in Brussels to discuss ways to tame the storm.
             
Moody's shocked financial markets on Wednesday when it placed Spain on review for a possible downgrade, blaming the nation's stretched finances and banking problems and stirring fears the debt crisis could spread even further and threaten the whole eurozone project.
 

 

Date created : 2010-12-17

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