Fitch Ratings has downgraded the Republic of Ireland’s (Ireland) Long-term foreign and local currency Issuer Default Ratings (IDRs) to ‘A+’ from ‘AA-‘ respectively. The Outlooks on the Long-term IDRs are Negative. Fitch has simultaneously downgraded Ireland’s Short-term foreign currency IDR to ‘F1’ from ‘F1+
Problems with the nation’s largest banks are part of the heart of the matter.
“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,” said Chris Pryce, Director in Fitch’s Sovereign Group. “The Negative Outlook reflects the uncertainty regarding the timing and strength of economic recovery and medium-term fiscal consolidation effort.”
Fitch added that if the situation did not improve there could be another downgrade as soon as 12 months from now.
The sovereign borrowing costs for Ireland will likely soar to a level where it will be nearly impossible for the nation to cover its debt service, which may well cause the need for an Greece style bailout.
Douglas A. McIntyre
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