Standard & Poor's lowers Ireland credit rating

By AFP

July 15, 2010 Updated Jun 8, 2009 at 8:01 AM CDT

International ratings agency Standard & Poor's on Monday cut Ireland's sovereign credit rating as the nation's finances were savaged by a costly rescue package for the banking sector.

"Standard & Poor's Ratings Services ... lowered its long-term sovereign credit rating on the Republic of Ireland to 'AA' from 'AA+'. The outlook is negative," the group said in a statement.

"We have lowered the long-term rating on Ireland because we believe that the fiscal costs to the government of supporting the Irish banking system will be significantly higher than what we had expected when we last lowered the rating in March 2009, and, consequently, that the net general government debt burden will also be significantly higher over the medium term," it added.

The AA rating is two notches below the top AAA ranking but still means on the S&P scale that Ireland has a "very strong" capacity to repay its borrowings.

Ireland has been savaged by the international financial crisis and the collapse of a domestic property bubble.

The former "Celtic Tiger" economy became the first eurozone nation to enter recession when it posted two successive quarters of negative growth in the first half of 2008 .

The Irish government has pumped seven billion euros into the top two lenders, Allied Irish Bank (AIB) and Bank of Ireland (BofI), with each getting 3.5 billion euros in state cash.

The administration has also created a "bad bank," the National Asset Management Agency (NAMA), to take over soured property and development loans on the books of Irish banks. The "toxic" assets have a book value of up to 90 billion euros.

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