Yet another EU member country was downgraded by Moody’s. Adding to the list withGreece and Portugal, Ireland was the next in line with its credit rating cut to junk status and a warning that it may need a second bailout.
Ireland says it is fully funded until the end of 2013 based on its current IMF-EU bailout package. The Irish government wants to return to the debt markets once the funds are depleted.
Moody’s downgraded Ireland’s rating by one notch, with its rating now standing at Ba1, but the rating agency has kept the negative outlook, meaning further downgrades are likely in the next 12 to 18 months.
The Irish government responded by saying “This is a disappointing development and it is completely at odds with the recent views of other rating agencies.”
“We are doing all that we can to put our house in order and the progress that we are making is there for all to see” , commented the Finance ministry.
The finance ministry further said that Moody’s move appeared not to reflect the Eurogroup developments. During meetings held in the past two days, Eurogroup finance ministers agreed to cut the interest rate for countries borrowing from their rescue fund , consequently making it more flexible such that countries can extend its loan maturities. These significant developments were hailed by Dublin as helping it return to debt markets.
Moody’s analyst Dietmar Hornung said “the risk of private sector participation in any future bailout meant investors would be put off lending fresh funds to Ireland”.
Hornung warned over the risks even though Moody’s is confident the euro zone is “willing to continue to provide liquidity support for peripheral countries and give them time to achieve a sustainable financial position”.