Standard & Poor’s said on Tuesday it was lowering its short and long-term credit ratings for the Republic of Ireland by a notch, and placed it on credit watch.
The action followed a proposed bailout of debt-laden Ireland by the EU and the IMF of up to 90 billion euros (US$122 billion).
The ratings agency said it is “lowering its long-term sovereign credit rating on the Republic of Ireland to ‘A’ from ‘AA-’ and its short-term rating to ‘A-1’ from ‘A-1+.’”
PHOTO: EPA
“The lower ratings reflect our view that the Irish government looks set to borrow over and above our previous projections to fund further bank capital injections into Ireland’s troubled banking system,” it added.
S&P said it was putting Ireland on credit watch “with negative implications,” saying another downgrade was possible if negotiations on the terms of the bailout or Ireland’s budget for next year “fail to staunch wholesale funding outflows.”
The ratings agency said the proposed EU/IMF bailout might instill confidence in bank liquidity, but will not reduce the government’s large liabilities or eliminate negative pressures on asset quality.
“With domestic demand unlikely in our view to recover until 2012, gross debt to GDP at end 2011 looks set to exceed our previous projections of 120 percent of GDP,” it said.
“Due to the rigidities of Ireland’s monetary framework and the uncertain outlook for external demand, deflation continues to represent a key risk to the government’s tax receipts,” it said.
Meanwhile, beleaguered Irish Prime Minister Brian Cowen was to present yesterday a four-year austerity plan in a key step to an international bailout for the debt-ridden eurozone country.
The unveiling of the austerity measures roadmap precedes Cowen’s submission to parliament on Dec. 7 of a budget which is considered crucial to obtaining rescue loans which Irish broadcaster RTE reported were worth 85 billion euros.
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