Ireland’s rating cut three levels by Fitch
Published 09/12/2010 | 12:24
Ireland’s credit rating was cut three levels by Fitch Ratings, which cited the mounting cost of rescuing the banking system after the country sought international assistance last month.
Ireland’s rating was lowered to BBB+ from A+, Fitch said in a statement in London today. It said the outlook on the rating, which is three steps above non-investment grade, is “stable.”
The Government agreed to an €85bn bailout from European governments and the International Monetary Fund on November 28 as the cost of protecting ailing lenders overwhelmed it.
European authorities pressured Ireland to seek aid in a bid to stem a growing crisis and prevent contagion to Spain and Portugal.
“The downgrade reflects the additional fiscal costs of restructuring and supporting the banking system,” Fitch said in the statement. “Ireland’s sovereign credit profile is no longer consistent with a high investment grade rating.”
Irish 10-year government bonds declined, erasing gains, after Fitch lowered the credit rating. The yield on the securities rose two basis points at 8.23pc as of 11:19am in London.
The downgrade leaves Ireland two rating steps above Greece, which earlier this year became the first euro-area country to seek aid from the EU and the IMF.
Standard & Poor’s lowered Ireland’s rating by two levels on November 23, citing increased borrowing by the sovereign to prop up its “troubled banking system.”
Under the EU-IMF bailout, Irish banks will receive as much as €35bn of additional capital. The aid includes an “immediate” injection of €10bn, with a further €25bn in contingency funding.
The Government this week unveiled a €6bn budget for 2011, the first step on a four-year plan to lower the deficit to the EU limit of 3pc of gross domestic product. The shortfall will be about 12pc of GDP this year, or 32pc of GDP once bank-rescue costs are included.