STATE borrowing costs have been sent soaring in the wake of the damaging downgrade of Irish debt by Standard & Poor's credit rating agency.
The country was today trying to auction off €600m in treasury bills as international scrutiny of the Irish economy and its banks continues. A knock-on effect of the report could be that mortgage rates would rise heavily, it was feared today.
Junior Labour Minister Dara Calleary said the Government had very deliberately taken the unusual step of publicly criticising the S&P rating.
People should remember, he said, that despite the revised rating Ireland was still one of the strongest in the Eurozone and had "very strong capability to meet all our commitments".
Ireland's credit rating is now at its lowest level in 15 years but still remains higher than six of the other 16 euro area countries, including Italy, Portugal and Greece.
Mr Calleary also indicated that the Government was very anxious to "bring certainty" to the Anglo Irish Bank situation and was confident that this process would be finalised by the end of the year.
Yesterday National Treasury Management Agency (NTMA) chief executive John Corrigan described the S&P downgrading as "flawed". He said it was based on extreme conclusions that did not put any value on NAMA assets.
The rating agency has responded saying that, despite the downgrade, Ireland still has "a very strong credit rating".
But S&P not only downgraded Ireland's credit rating but it maintained its "negative watch" on the State indicating that it may look to downgrade Irish government debt in the future. "The negative outlook reflects our view that the rate could be lowered again," the agency confirmed.
Opposition parties have claimed this week's downgrading is a "hammer blow" to the economy and reveals the extent of the Government's failed banking policy.
S&P believes that the total cost, including NAMA, of Irish bank bailouts will come to €90bn -- a figure rejected by NTMA.
A key point of difference between the two sides is the ultimate cost of Anglo Irish Bank, with the Irish authorities putting this at €24bn while S&P put it at €35bn.
Mr Calleary said the State had been involved in discussions with the European Commission. "A lot of time and effort is going into the valuing process" to ensure "the best deal for the Irish taxpayer".