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'Low point' reached as agency rates us alongside Botswana

RATINGS agency Standard & Poor's (S&P) has cut Ireland's credit rating again, saying it's still not certain how much it will cost to rescue the country's banks.

Ireland was cut one notch to A- and remains on "negative watch'', meaning further downgrades could happen. Ireland is now grouped with Botswana and Portugal, but does retain an investment-grade rating for now.

The IMF/EU programme envisages the banks getting up to €35bn in fresh capital in a worst-case scenario, but the agency said it would await the final figure in March. S&P said Ireland was at its "low point'' and it should be possible for any government to make the required savings, but it said the scale of the banking problems remained unclear.

S&P also downgraded all the main banks on the back of the sovereign announcement.

The financial performance of the main banks will remain "depressed for several more years',' said the agency.

"This reflects both the backdrop of an even more protracted weak economic environment and expected high problematic assets,'' it added.

"Several banks have large books of tracker mortgages, which in our view are currently uneconomic and cannot be repriced," the agency noted.

The new S&P rating remains above the ratings of both Fitch and Moody's, at BBB+ and Baa1 respectively.

S&P analyst Frank Gill said the new Ireland rating remained "solidly investment grade", meaning the agency did not expect Ireland to default on any of its external debt.

He said the key ratings concern regarding Ireland was uncertainty.

"There is uncertainty on growth, uncertainty about the labour market and about the level of impairments on non-NAMA bank assets," he told the Irish Independent. Mr Gill said predicting growth rates in the Irish economy was difficult but he expected GDP growth of 0.3pc in 2011.

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