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Ireland’s debt rating cut by Fitch

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by Kay Mitchell
Ireland's debt rating cut by Fitch

Ireland received yet another blow today after credit agency Fitch cut the country’s debt rating to A+ from AA- with a negative outlook.

Fitch said the downgrade was due to massive banking bailouts, which have drained the economy, as well as uncertainty surrounding the fragile recovery.

Fitch also cut the short-term foreign currency issuer default rating to F1 from F1+.

The move comes just a day after fellow rating agency, Moody’s, warned it may downgrade Ireland’s credit rating again, due to its ailing banking system.

In addition, Moody’s said weak economic growth and rising borrowing costs could lead to the further cut.

The Irish Government said it was introducing additional austerity measures, to bring the deficit below 3% of GDP by 2014 to keep within euro zone rules.

The former “Celtic Tiger” economy has a ballooning budget deficit of 32% of GDP this year.

Many analysts are of the opinion that Ireland will fall into recession again and recent setbacks within the economy will just add fuel to the fire.

However, Ireland has still not yet been downgraded to the BBB- rating (which Fitch has for Greece) - which is one notch away from junk status.

Meanwhile, returning to today’s decision, Chris Pryce, director in Fitch’s sovereign group, said: “The downgrade of Ireland reflects the exceptional and greater-than-expected fiscal cost associated with the government’s recapitalisation of the Irish banks, especially Anglo Irish Bank.”

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News posted: October 6, 2010

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