Irish credit rating cut two levels by Fitch
Wednesday November 04 2009
Ireland has had its credit downgraded two levels by Fitch Ratings, which cited a widening budget deficit and the rising cost of bank-rescue measures.
The rating was reduced to AA- from AA+ with a “stable” outlook, the company said today in a statement.
Fitch cut the grade from the highest AAA level in April. The downgrade puts the country’s rating at the same level as Italy and Cyprus.
The budget deficit is set to widen to 12pc of gross domestic product this year, according to government forecasts, four times the European Union limit.
At the same time, the Government is setting up the so-called bad bank that will spend €54bn buying toxic loans from financial institutions.
The downgrade “reflects the severity of the decline in nominal GDP and the exceptional rise in government liabilities,” Chris Pryce, a Fitch director in London, said in the statement. “The breadth and depth of the country’s banking sector problems have substantially increased sovereign risk.”
The difference in yield, or spread, between 10-year Irish debt and the German equivalent was little changed at 145 basis points today. It reached 284 basis points in March.
Standard & Poor’s and Moody’s Investors Service reduced Ireland’s sovereign ratings earlier this year.
- Brad Skillman and Fergal O’Brien
© Bloomberg
