Mediafax (Mediafax)
Finance  |  December 17, 2010 08:55:05

Moody's reduced by 5 degrees Baa1 rating on Ireland


Mediafax

DUBLIN (MEDIAFAX) - Moody's on Friday cut Ireland's credit rating by five grades of "Aa2" to "Baa1". Rating outlook is negative Moody's advised in a statement.

The main reasons for Moody's said major difficulties of the Irish banking sector, then the uncertainty that exists about the economic outlook of the country.

The negative outlook also reflects the view of rating agencies, according to which it is possible that there is a further reduction in credit ratings of Ireland. This could occur if economic growth will be lower than expected, or if the costs of stabilizing the banking sector will be higher than estimated.

As to the future economic development agency is particularly worried about the impact of austerity measures, which counts four-year program totaling 15 billion euros (377 billion CZK). Only in 2011 the government plans to save six billion euros (151 billion CZK), which is 40 percent of total savings.

Problems associated with Ireland's economic development in recent years. Country's banking sector most affected by the bubble in the property market. Including the rehabilitation sector, the budget deficit in 2010, Ireland is predicted to reach 32 percent of gross domestic product (GDP).

Dublin 21st November asked the European Union (EU) and International Monetary Fund (IMF) for financial assistance. Total should reach 85 billion euros (2.1 trillion CZK).Of this amount will be donated € 35 billion (CZK 880.4 billion) in the Irish banking sector, while 50 billion euros (1.26 billion CZK) alone gets Ireland to meet its budgetary needs. To help in the form of bilateral loans and non-members will participate in the euro area as Great Britain, Sweden and Denmark. Half of the funding intended for the banking sector, ie € 17.5 billion (440.2 billion CZK), provide Ireland itself.

European Commission expects that this year the Irish economy will decline by 0.2 percent, while next year will grow by 0.9 percent.

The rating agency credit ratings began to examine the 5th of Ireland October this year.

Moody's downgraded Ireland's credit rating one notch to "Aa2" from previous "Aa1" 19th July this year.Then the main reason for downgrade marked increasing the ratio of government debt to gross domestic product (GDP) and weaker economic growth outlook of the country.

Simone Radacicova, radacicova@mediafax.cz

Adding editors:
The downgrade also went earlier and Fitch from A + to BBB + - see Fitch cut Ireland's credit rating at (Dec. 9, 2010) .

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