Ireland's credit rating downgraded again

Ireland moved to the brink of losing an A-grade credit rating today after Standard & Poor's downgraded the country's debt for the third time in six months. S&P cut its rating on Ireland's long-term debt by one notch, to A- from A, one downgrade away from falling into the B range. It blamed its decision on Ireland's crippled banking sector, warning that the Irish government may have to pump even more money into it if the wider economy weakens further. "We estimate the external indebtedness of Ireland's domestic banking groups, excluding the international financial services sector, at over 170% of GDP; Irish domestic banks currently depend almost entirely on the ECB to refinance expiring market debt," said Standard & Poor's sovereign credit analyst Frank Gill. "Were the labour market to deteriorate further, a rise in the level of delinquencies in the domestic banks' mortgage books could result in higher new capital requirements than we presently assume." S&P also kept a negative outlook on Ireland, an indication that its rating could be cut further. The agency said it expected that Ireland will retain an "investment grade" rating at the end of this process. It would have to fall another four notches to end up in "junk" territory. Ireland lost its prized AAA credit rating with S&P in March 2009, and slid down the scale as the full crisis in its banking sector became apparent . Fitch and Moody's have both already cut Ireland's credit rating into the B category, following the €85bn (£72bn) IMF-EU bailout agreed late last year.