21 Jul.
Ireland’s efforts to pull out of a deep economic slump suffered a setback after Moody’s downgraded the country’s bond rating by one notch, to Aa2 from Aa1, citing a weak banking system and rising debt. It also changed the outlook on the ratings to stable from negative.
“Today’s downgrade is primarily driven by the Irish government’s gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability,” a senior credit officer at Moody’s, Dietmar Hornung, said.
The Moody’s downgrade put its ratings in line with other agencies. Standard & Poor’s downgraded Ireland to AA in June 2009, after lowering it to AA+ from AAA in March 2009. Fitch downgraded Ireland to AA+ from AAA in April 2009, then to AA- in November 2009.
Moody’s also said that the downgrade had been driven by the increased burden in liability for banks after a series of recapitalization measures led by the state.
As a result, yields on the benchmark 10-year Irish bond rose slightly, by 0.04 percentage point.
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