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Gloomy outlook means we're reduced to junk

IRELAND's "likely" need for a second bailout in 2013 means we are now categorised as being as risky as Portugal or Greece.

Ratings agency Moody's decision yesterday to downgrade Ireland's credit rating to junk status is a major blow to Government's hopes of getting back in the bond markets.

The agency said that Ireland may need a second bailout in two years time when the current support programme from the EU and IMF runs out.

The rating came as a shock on a day when Minister for Finance Michael Noonan said that measures to aid Greece proposed by eurozone finance ministers on Monday night would help Ireland.

Investors are less likely to put their money into Ireland and the country's banks will find it even harder to attract deposits and loans from other banks, analysts said.

Moody's said that while Ireland had made progress in tackling its debts, "risks remain significant".

It also said there was an increasing possibility that private-sector holders of Irish debt would be asked to take part in talks on a second rescue programme.

While the resulting downgrade spurred the sale of Irish bonds today, the other ratings agencies, Standard & Poor's and Fitch, still have Ireland above junk status.

But a significant sell-off in Irish bonds would fuel anxiety that the debt crisis is spiralling out of control and spreading into major Euro economies, observers warned.

While Ireland has never had such a low credit rating, some said the Moody's decision will put pressure on Europe's lenders to design a new package of measures to help Ireland, Greece and Portugal.


Taoiseach Enda Kenny is expected to attend an emergency summit in Brussels on Friday to try and solve the continent's economic woes once and for all.

A spokesman for the Department of Finance said of the Moody's decision: "This is a disappointing development and it is completely at odds with the recent views of other rating agencies."

It was "difficult to see" how the downgrade reflected moves to enhance the fund's flexibility expressed by eurozone finance ministers on Monday night, he added.

The National Treasury Management Agency noted Moody's acknowledgement: "that Ireland has demonstrated a strong commitment to fiscal consolidation and is successfully delivering on its objectives as required under the EU/IMF Programme of Support," the NTMA said.

The Eurogroup set out a range of measures to safeguard the euro area's financial stability on Monday, it said, and these were all positive developments for Ireland, it said.

"Ireland has sufficient funding under the EU/IMF Programme of Support to cover all its financial arrangements until the end of 2013," the NTMA added.

Dublin MEP Paul Murphy of the Socialist Party said the downgrading was "yet another nail in the coffin of the economic policy of the Labour/Fine Gael Government and brings us one step closer to inevitable default."

Instead of pouring billions "down the black hole of interest repayments, while savaging the living standards of working people, we must now refuse to pay the debts to the banks and super-rich speculators," he added.

See Dan White, p15