The credit rating agency Standard & Poor has lowered Ireland's sovereign credit rating for the second time in just three months. The emerald isle has gone down from a top rating of AAA in March to AA+ with negative outlook to its current AA rating.
The agency justified its decision by predicting government costs to support Ireland's struggling banking system would be ‘significantly' higher than expected at the last credit slash. In short - Ireland's debt burden is expected to soar in the coming years, not helped by higher borrowing costs off the back of the lowered credit rating.
The Republic's recent status as a potentially risky borrower is set to continue and possibly get worse, as the bean counters at S&P have hinted with their decree of a negative outlook. The news comes after a tough start to the year for the Irish economy, with the momentous losses at Anglo Irish Bank a particular low point which "highlight both the continued fragility of the Irish banking sector and its reliance on the government for ongoing financial support" say S&P. The financial gloom is pervaded with a stagnant property market and massive job losses across all sectors, as Alan Ruddock described in his recent feature analysis.
Plans are also afoot to set up a controversial National Management Agency (NAMA) to tackle the bank's balance sheets involving a massive transfer of wealth. NAMA has predicted a Eur25 billion bill to support the banking sector which could see the net government debt reaching 100% of gross domestic product. More dreadful news for Prime Minister Brian Cowan and his flaiiing coalition government which faces a vote of no confidence in the country's local elections today.
Meanwhile as the prverbial heads towards the fan, MT's favourite Irish businessman Michael O'Leary has been selling off 5m Ryanair shares, raising a handy £16m in the process. Don't worry, he's got plenty left - his 60m remaining shares amount to a 4% stake in Ryanair.
The S&P agency hasn't ruled out a further credit downgrade for Ireland, either. But the nation's Department of Finance has hit back at the monetary moping and pointed out that Ireland has already looked down the back of the sofa and raised Eur 13 billion this year on the international debt market.
The land of saints and scholars may not quite be drinking in the last chance saloon, but by the look things there's a way to ge yet before the recessionary headache starts to wear off. Slainte.