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Moody's downgrades Ireland to 'junk'

The credit rating agency has downgraded Ireland just one week after Portugal.

Image: Mark Lennihan/AP/Press Association Images

THE CREDIT RATINGS agency Moody’s has downgraded Ireland‘s long-term debt to junk status from Baa3 to Ba1 – the highest junk grade.

The Wall Street Journal reports that Moody’s kept Ireland’s credit outlook negative, saying the country would probably need more financing before it can return to the private market. In a release, Moody’s said:

“The key driver for today’s rating action is the growing possibility that following the end of the current EU/IMF support program at year-end 2013 Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support, in line with recent EU government proposals.”

NTMA response

The National Treasury Management Agency (NTMA) noted the decision by Moody’s tonight, saying that decision was “primarily driven by their concern about the prospect of private investor participation in future financial support programmes in the euro area,” but that Moody’s had acknowledged that Ireland had “demonstrated a strong commitment to fiscal consolidation and is successfully delivering on its objectives as required under the EU/IMF Programme of Support.”

The NTMA stressed that Ireland has sufficient funding under the EU/IMF Programme of Support “to cover all its financing requirements until the end of 2013″, and pointed out that the country retains investment-grade status with the other main ratings agencies.

It said that the situation in the eurozone is “evolving rapidly” and the range of measures to safeguard the euro area’s financial stability set out by the Eurogroup on Monday – including enhancing the flexibility and the scope of the European Financial Stability Facility, lengthening the maturities of the loans and lowering the interest rates – were positive developments for Ireland.

Read: Ireland could be next to face ‘junk’ status after Portugal – report >

Read: EU Commission criticises ratings agencies >

Read:Moody’s downgrades Portugal to junk >

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