Moody's downgrades Ireland's debt rating

20 July 2010

Moody's has decided to downgrade Ireland's debt rating to Aa2.

The credit rating agency gave its reasons as the high cost of rebuilding the country's banking sector, as well as weaker prospects for economic growth.

Dietmar Hornung, lead analyst for Ireland at Moody's, said: "[The] downgrade is primarily driven by the Irish government's gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability."

Ireland has the highest budget deficit in Europe at 14 per cent of GDP following last year's bail out of Anglo Irish Bank.

The deficit may reach as high as 20 per cent by the end of the year, reports the Guardian.

Martin Mansergh, Ireland's minster of state for finance, said the Moody's downgrade was not a surprise as everyone in the country is aware of the current weakness of the banking and real estate sectors.

Last month, a report by Royal Bank of Scotland revealed that Ireland is one of the four main countries driving an increase in lending from the European Central Bank.

The others are Greece, Portugal and Spain, reported the Financial Times.

By Claire Archer

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