S&P downgrades Ireland’s debt ratings by a notch


LONDON–Standard & Poor’s on Wednesday downgraded its short- and long-term debt ratings for Ireland by one notch, citing concerns about the health of the eurozone nation’s banking sector. S&P, one of the top three international ratings agencies, said it was also lowering its ratings on four Irish banks — Allied Irish Banks, Anglo Irish Bank, Bank of Ireland and Irish Life & Permanent. “Standard & Poor’s Ratings Services today said that it has lowered its long-term ratings on the Republic of Ireland to ‘A-‘ from ‘A’ and its short-term ratings to ‘A-2’ from ‘A-1.’” S&P added in a statement that it was keeping the Ireland ratings on “creditwatch with negative implications.” That reflected its view “of the uncertainties surrounding the size of Ireland’s additional capital needs for its largely state-owned financial sector.” In November, Dublin was forced to agree a 67.5-billion-euro (US$93 billion) bailout with the European Union and International Monetary Fund, despite Prime Minister Brian Cowen insisting days earlier that no emergency aid was needed. Ireland’s embattled government on Tuesday called a general election for Feb. 25, expected to see it become the first administration ousted as a result of the eurozone debt crisis. Downgrades by ratings agencies tend to ramp up the costs of borrowing on international financial markets for those targeted. Explaining its downgrades for Ireland, S&P sovereign credit analyst Frank Gill said: “We estimate the external indebtedness of Ireland’s domestic banking groups (excluding the international financial services sector) at over 170 percent of GDP; Irish domestic banks currently depend almost entirely on the ECB to refinance expiring market debt. “Were the labor market to deteriorate further, a rise in the level of delinquencies in the domestic banks’ mortgage books could result in higher new capital requirements than we presently assume.” Ireland’s unemployment rate dropped in January but nevertheless stood at a lofty level of 13.4 percent, official data showed Wednesday. It fell last month from an upwardly revised 13.6 percent in December, the Central Statistics Office said in a statement. December’s level had originally been estimated at 13.4 percent. Explaining the downgrades to the banks, S&P said: “In our opinion, both the ability and willingness of the Irish government to provide extraordinary support to the four rated domestically owned Irish banks has weakened.”

Ireland became the second member of the eurozone after Greece to seek a bailout, and the government has rushed through a package of austerity measures as a pre-condition to receiving the loans. Cowen will meanwhile take no part in Ireland’s election campaign, having announced he is bowing out of politics after a bruising term as Taoiseach, or prime minister.