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Moody’s to review Ireland’s debt rating

Credit rating agency Moody’s has placed Ireland’s debt rating on review for a possible downgrade.

If Ireland’s rating is downgraded, it would go from Aa2 to Aa3. However, it is possible the country’s rating could fall to single A if the agency is convinced the stabilisation of Ireland’s key debt ratios is unlikely.

The review will focus on Ireland’s ability to preserve government financial strength in a difficult economic environment.

The rating agency says the decision to initiate the review was prompted by increased uncertainty regarding Ireland’s ability to preserve Government financial strength after additional bank recapitalisation measures announced on September 30. It also cited the clouded outlook for the recovery of domestic demand and a further rise in borrowing costs since its last rating action in July.

Moody’s senior credit officer and lead sovereign analyst for Ireland Dietmar Hornung says: “Ireland’s ability to preserve government financial strength faces increased uncertainty as a result of three main drivers, which together would further increase its debt and aggravate its debt affordability.”

The Irish Government is due to present a four-point fiscal plan in November in an attempt to reassure the debt markets and the taxpayer.

In August, Standard & Poor’s downgraded the Irish Republic to its lowest sovereign rating in 15 years, cutting the rating from AA to AA-, its lowest since 1995, having cited the fact that costs continued to rise as the country looked to boost its troubled banking sector.

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