Ireland's credit rating downgraded by Moodys

[MikeWB]

Here come riots

http://www.irishtimes.com/newspaper/breaking/2010/0719/breaking7.html
Ireland's credit rating downgraded by Moodys
CIARA O'BRIEN

Credit agency Moodys has downgraded Ireland's government bond ratings to Aa2, blaming banking liabilities, weak growth prospects and a substantial increase in the debt to GDP ratio.

The general government debt-to-GDP ratio was at 64 per cent at the end of last year, up from 25 per cent before the financial crisis took hold, and is continuing to rise.

"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," said Moody's lead analyst for Ireland Dietmar Hornung.

The support provided to the banking system, including the transfer of loans to the National Asset Management Agency, was also cited as a key factor in the rating downgrade. Recapitalisation measures already announced may reach €25 billion, the agency said, but Anglo Irish Bank may require further support.

"While we do not expect the government - not even in a moderately stressed scenario — to incur permanent losses in excess of 25 per cent of the country's 2009 GDP as a result of these obligations, we believe that the uncertainty surrounding final losses would exert additional pressure on the government's financial strength," the agency said in a statement.

The move comes just over a year after Moody's last downgraded the country's rating. On July 2nd 2009, the agency gave the bonds a Aa1 rating, with a negative outlook.

However, the outlook was today changed to stable, with Moody's now viewing the upside and downside risks as evenly balanced at the current rating level.

The agency said it expect expects economic growth to be below historical trend over the next three to five years due to the weak banking and real estate sectors, and the fall in private sector credit.

"If the GDP growth trend were to exceed Moody's expectations - with a quick resumption of domestic credit flow and a supportive global economic environment — then the government's debt metrics could stabilise earlier than is currently being assumed," said Mr Hornung.

General government debt-to-GDP ratio is expected to stabilise at 95 per cent to 100 per cent over the next two to three years, Moody's said.

"Given Ireland's wealthy and flexible economy and its very high institutional strength, these debt levels are commensurate with a Aa2 rating. Ireland's demonstrated adjustment capability and its economic vitality — reflected for instance in its ability to attract foreign direct investment — are important characteristics that support the rating," the agency said.

[Ognir]

I can't see them rioting yet as most are still in shock and just not awake enough to really understand

[MikeWB]

Oh, they'll riot once they start feeling the brunt of austerity measures which are coming. IMF will make sure of that

[joeymaclover]

Once they start pushing their shopping carts around, you bet your sweet ass they figure it out!