ECONOMY: Moody's warns of downgrading
IRELAND has been placed on a warning for a rating downgrade by Moody's Investors Services.
The international rating agency said that it might downgrade Ireland by one notch from Aa2.
The agency will be keeping an eye on the Government's fiscal plan.
The review was prompted by the bank recapitalisation plan, issued last Thursday.
The additional measures are likely to raise the Government's total cost for bank support by €10-15bn, Moody's said.
This will lead to a substantial rise in Ireland's general Government deficit to around 32pc of gross domestic product this year.
The increase in Government debt, and the higher cost of paying interest on this, as well as weaker growth prospects and the costs of supporting the banks, also weighed heavily on its decision.
The agency also said it had put the National Asset Management Agency's Aa2 rating on review for possible downgrade.
Lead sovereign analyst for Ireland Dietmar Hornung said that it took these factors into account and that: "Ireland is on a trajectory toward lower debt affordability over the next three to five years."
Moody's cut the country's rating from Aa1 to Aa2 in July but the review is threatening to bring this down by one notch.