Ireland downgraded five notches to Baa1 by Moody's; outlook negative

Moody's downgraded Ireland's gov't bond ratings by five notches all the way down to Baa from Aa2 with outlook negative.

This action is absolutely expected and markets had already determined long ago that Ireland was more much more risky than its credit rating would indicate.  They are still investment grade but just three notches from losing that status. 

It could have been much worse though.  Moody's indicated that "the economy's competitiveness and its business-friendly tax environment are credit-positive".  Wages have taken a hit and I they of course say that this is a positive.  They aren't rioting, so that's another positive. 

They are not Greece.  Greece is at Ba1 with an expected multi-notch downgrade coming some time soon. 

There rationale for the Irish downgrade via Moody's:
The key drivers for today's rating action are:
1. the crystallization of bank related contingent liabilities;
2. the increased uncertainty regarding the country's economic outlook; and
3. the decline in the Irish government's financial strength.

Moody's negative outlook on the ratings of the government of Ireland is based on our forward looking view on the risk that the Irish government's financial strength could decline further if economic growth were to be weaker than currently projected or the costs of stabilizing the banking system turn out to be higher than currently forecast.


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