Rationale for Ireland’s debt downgraded to JUNK status by Moodys (Irish Democrat)


From The Irish Democrat – Ireland’s debt downgraded to JUNK status:

According to Moody’s the reason for the downgrade is:

“Moody’s Investors Service has today downgraded Ireland’s foreign- and local-currency government bond ratings by one notch to Ba1 from Baa3. The outlook on the ratings remains negative.

The key driver for today’s rating action is the growing possibility that following the end of the current EU/IMF support programme at year-end 2013 Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support, in line with recent EU government proposals.

As stated in Moody’s recent comment, entitled “Calls for Banks to Share Greek Burden Are Credit Negative for Sovereigns Unable to Access Market Funding” (published on 11 July as part of Moody’s Weekly Credit Outlook), the prospect of any form of private sector participation in debt relief is negative for holders of distressed sovereign debt. This is a key factor in Moody’s ongoing assessment of debt-burdened euro area sovereigns.

Although Moody’s acknowledges that Ireland has shown a strong commitment to fiscal consolidation and has, to date, delivered on its programme objectives, the rating agency nevertheless notes that implementation risks remain significant, particularly in light of the continued weakness in the Irish economy.

The negative outlook on the ratings of the government of Ireland reflects these significant implementation risks to the country’s deficit reduction plan as well as the shift in tone among EU governments towards the conditions under which support to distressed euro area sovereigns will be made available.

Despite the increased likelihood of private sector participation, Moody’s believes that the euro area will continue to utilise its considerable economic and financial strength in its efforts to restore financial stability and provide financial support to the Irish government. The strength and financial capacity of the euro area is underpinned by the Aaa strength of many of its members including France and Germany, and indicated by Moody’s Aaa credit ratings on the European Union, the European Central Bank and the European Financial Stability Facility.

Moody’s has today also downgraded Ireland’s short-term issuer rating by one notch to Non-Prime (commensurate with a Ba1 debt rating) from Prime-3.

In a related rating action, Moody’s has today downgraded by one notch to Ba1 from Baa3 the long-term rating and to Non-Prime from Prime-3 the short-term rating of Ireland’s National Asset Management Agency (NAMA), whose debt is fully and unconditionally guaranteed by the government of Ireland. The outlook on NAMA’s rating remains negative, in line with that of the government’s bond ratings…

Read more on “Rationale for Downgrade”, and “What could change the Rating Up or Down”.

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This entry was posted in Accountability, Bankers' Bailout, Budget, Debt Default/Restructuring, ECB/IMF, Economy, EU, ireland and tagged , , , , . Bookmark the permalink.

One Response to Rationale for Ireland’s debt downgraded to JUNK status by Moodys (Irish Democrat)

  1. Pingback: Ireland Debt | Debt & Credit Blog| Free Online Tips and Resourses

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