Despite meeting all of its austerity targets to date, Ireland saw its credit rating cut to junk as part of what appears to be Moody’s Investors Service’s summer of slashing.
Moody’s downgraded Ireland’s foreign- and local government bond ratings to the undesirable level of “Ba1” and stressed the nation’s outlook continues to be “negative.” Fueling the decision to cut the rate is Moody’s belief that the nation will need further assistance from the European Union and International Monetary Fund after the present aid program runs its course in 2013.
“The prospect of any form of private sector participation in debt relief is negative for holders of distressed sovereign debt,” Moody’s statement noted. “Although Moody's acknowledges that Ireland has shown a strong commitment to fiscal consolidation and has, to date, delivered on its programme [sic] objectives, the rating agency nevertheless notes that implementation risks remain significant, particularly in light of the continued weakness in the Irish economy. The negative outlook on the ratings of the government of Ireland reflects these significant implementation risks to the country's deficit reduction plan as well as the shift in tone among EU governments towards the conditions under which support to distressed euro area sovereigns will be made available.”
Brian Shappell, NACM staff writer