Moody's red-faced after blunder on fiscal referendumAgency's information on Ireland out of date
INFLUENTIAL credit ratings agency Moody's was left red-faced when it issued a report on Ireland saying our current credit rating of Ba1 could be cut if there was a " rejection of the EU fiscal compact in the upcoming referendum".
Ireland passed the fiscal compact referendum in May by a margin of 60pc to 40pc.
The report on Ireland was taken down from Moody's website within hours of the error being highlighted to the agency.
A spokesman for Moody's said the section on what could change the rating down was "inadvertently not updated".
However, the slip-up is hugely embarrassing for the agency, which charges banks, bond traders and national treasury agencies thousands of euro for its in-depth analysis on the financial state of various countries including Ireland. Bond traders often buy and sell a country's debt on the bond markets based on the information and analysis offered by the rating agencies.
Moody's has since issued a new note on Ireland affirming the country's Ba1 rating. It states Ireland's credit strengths as being a business friendly environment with a competitive tax system and a flexible labour market with a highly-skilled workforce.
It said that our relatively predictable policy framework, commitment to fiscal consolidation and structural reforms, and our success in achieving all objectives under the fiscal adjustment programme required by the EU/ IMF programme, contribute to our strengths.
However, Moody's said challenges remain, among them the preservation of the Government's national strength through a phase of low growth.
"Moody's would consider a further rating downgrade if the Irish Government does not meet the targeted fiscal consolidation goals.
"A further deterioration in the country's economic outlook would also exert downward pressure on the rating as would a further market disruption resulting from an event like a Greek re-default or exit from the euro area."
The agency said personal insolvency legislation, which is expected to come into force in March, will introduce debt forgiveness for borrowers deemed to have unsustainable mortgage debt.
"We expect that debt forgiveness rather than repossessions will become the preferred options for lenders dealing with borrowers that have unsustainable mortgage debt once all other alternatives have been deemed inappropriate or unsuitable," the report stated.
While the agency said the insolvency legislation will work in the long term, it expects that in the short to medium term it will increase arrears and losses.
"In the long term the legislation provides an efficient mechanism to deal with the mortgage arrears and negative equity issue," the report added.