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S&P: Return to markets is promising - but we won't increase Ireland's rating

The return to the bond markets is “an indication of progress”, it says – but the cost of borrowing is still way too high.

Image: Shawn Pogatchnik/AP

THE RATINGS AGENCY Standard & Poor’s has described Ireland’s return to the full bond markets as a promising sign of its ability to get back to the bond markets – but isn’t enough to get it to raise Ireland’s credit rating.

The agency said today it was affirming its BBB+ rating for Ireland – it’s seventh-highest rating – saying the rating reflected its view that the Irish government had “commitment and capacity to stabilize Ireland’s public finances”.

“Ireland’s creditworthiness is sustained, in our opinion, by a strong political consensus for fiscal consolidation measures, which should reduce the general government deficit to around 3 per cent of GDP by 2015,” it said.

Though the agency welcomed last week’s return to bond markets – in which Ireland raised €4.2 billion in loans to be repaid in 2020, and extended the repayment deadline for another €1.2 billion of previous loans – as positive, it remained guarded.

“Our negative outlook on the sovereign reflects our assessment that Ireland’s access to capital markets currently remains restricted,” it said – pointing out that the interest rate on a five-year Irish loan remained at 5.9 per cent.

“This could still be the case when the current EU/IMF program ends in 2013,” it said, pointing to the possibility that borrowing costs may be too high for Ireland to return to the markets full-time when the current funding programme ends.

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After last week’s rundraising, Ireland will need to raise €5.9 billion independently of the EU-IMF before the end of next year, in order to cover both the repayment of existing bonds and to plug the gap between its spending and its income.

Read: After the global financial crisis, why are rating agencies still trusted?

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Gavan Reilly

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