Ireland facing credit rating downgrade

6 October 2010

Ireland's credit rating is likely to be downgraded following a fresh injection of government money into the banking sector, it has been warned.

Credit ratings agency Moody's has stated it is considering whether to lower the nation's current Aa2 status, partly on the grounds that its economic recovery is running out of steam.

Dietmar Hornung, a European analyst for Moody's, told Bloomberg: "We're monitoring the banking system, which we now see has led to additional capitalization needs.

"The focus is on Ireland's ability to recover financial strength."

Last week, the government pledged to provide up to €50 billion ($68.6 billion) of bailout funding to save the country's banks.

The cost of repairing the financial sector in Ireland may rise as high as one-third of its GDP.

Finance minister Brian Lenihan said the "horrendous" costs of the latest bailout will lead to tough cutbacks having to take place in the public sector.

By Claire Archer

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