18 Dec 2010

Irish debt rating cut

10:24 pm on 18 December 2010

Credit rating agency Moody's has sharply cut the Irish Republic's debt rating and warned more downgrades could follow.

The rating was lowered by five notches to Baa1 from Aa2.

Fitch last week also stripped the country of its A credit rating.

On Thursday, the International Monetary Fund approved a three-year loan of 22.5 billion euros ($US30.1 billion) for the Republic.

The funds form the first part of the IMF's contribution to the EU and IMF rescue package for the republic totalling 85 billion euros.

Prime Minister Brian Cowen says the downgrade by Moody's is disappointing and excessive.

Mr Cowen says he is disappointed that Moody's adopted a negative rather than a stable outlook on Ireland's economy.

The Irish Republic is trying to reduce its high public deficit and large overall debt.

The BBC reports it is also having to shore up the country's banks, which have been left with huge bad debts following the collapse of the country's property market.

Figures issed on Thursday showed the Irish Republic returned to growth between July - September, with the economy expanding by 0.5% on the previous three months.

The economy shrank in the second quarter after exiting recession in the first three months of the year.

Spain also warned

Earlier this week, Moody's said it may downgrade Spain's credit rating - warning of problems the country faces in refinancing debts next year within local and central government, and at its banks.

Madrid denies similarities between the Irish economy and its own.

Figures issued on Friday by the central bank showed that bad loans held by Spanish banks in October were at their highest level since January 1996.