Fitch ratings downgrade - Ireland now BBB+

nuj

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Link to follow.
 


Aindriu

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Fianna FAIL's mother of all austerity budgets is going to save Ireland :rolleyes:

Watch our ratings fall even further yet as no market believes that the budget will work and all believe that we will default.
 

seanmacc

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One more downgrade and we are Junk. Why aren't we defaulting the banking debt? Will someone Please think of the children?
 

nuj

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Still waiting for link. Rating's down from A+, btw.

In practical terms it's only reflecting what's happened, our bonds have been priced at sub-A for the last ages. What it will mean, if/when followed by Moody's and S&P, is that a load of existing holders of irish government bonds will be forced sellers, as they'll no longer be allowed to hold them.
 
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Here's the statement from Fitch....

Fitch Downgrades Ireland to 'BBB+; Outlook Stable
09 Dec 2010 6:11 AM (EST)

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Fitch Ratings-London-09 December 2010: Fitch Ratings has downgraded the Republic of Ireland's (Ireland) Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'BBB+' from 'A+', respectively. The Outlooks on the Long-term IDRs are Stable. Fitch has simultaneously downgraded Ireland's Short-term foreign currency IDR to 'F2' from 'F1'.
The Euro Area Country Ceiling of 'AAA' remains unchanged. The notes issued by the National Asset Management Agency (NAMA) have also been downgraded to 'BBB+' from 'A+' and to 'F2' from 'F1', in line with the sovereign ratings.

The downgrade reflects the additional fiscal costs of restructuring and supporting the banking system, reflecting ongoing contingent liabilities arising from the guarantee of Irish bank debt and deposits (equivalent to 93.5% of GDP at end-Q310); weaker prospects and greater uncertainty regarding the economic outlook as a result of the recent intensification of the financial crisis; and the associated loss of access to market funding at an affordable cost, resulting in reduced fiscal financing flexibility.

The scale and pace of the deterioration of public finances, continuing contingent fiscal and macro-financial risks emanating from the banking sector, combined with the highly uncertain economic outlook and loss of market access, means that Ireland's sovereign credit profile is no longer consistent with a high investment grade rating. Ireland's continued investment grade status is underpinned by the EU-IMF external support, as well as the Irish government's demonstrated commitment to fiscal consolidation and still strong underlying economic fundamentals.

The structural budget deficit, which is estimated by the IMF to be equivalent to 8.6% of GDP in 2010, is the largest in the Euro Area and of any Fitch-rated sovereign in the single 'A' and 'BBB' rating categories. Similarly, the gap between the 2010 primary (non-interest) budget balance and that required to stabilise the government debt-to-GDP ratio is also the widest. Even assuming there are no additional fiscal costs associated with the restructuring of the banking sector and excluding the government-guaranteed debt issued by NAMA to fund the transfer of distressed assets from bank balance sheets (around 40% of GDP by end-Q111), gross government debt to GDP and revenue is projected to peak in 2013 at approximately 103% and 288% respectively, compared with the 'A' medians of 44% and 144%, respectively. General government interest payments/revenue are projected to rise to 15% by 2014 on official projections, substantially above the 10-year 'A' median of 5%.

Much of the Irish State's EUR17.5bn contribution to the EUR85bn EU-IMF programme, which includes EUR10bn from the National Pension Reserve Fund (NPRF), will be used to fund further capital injections into the banks and support asset disposals and 'deleveraging'. Liquid high-quality assets held in the NPRF and the Treasury cash reserve will therefore shrink under the programme. Combined with the loss of market access, which is likely to be prolonged, the Irish government's financing flexibility is significantly diminished, despite access to EUR67.5bn of external policy-conditional debt financing from the EU and IMF.

The outlook for the Irish economy, critical for stabilising public finances and debt over the medium term as well as for bank asset quality, is highly uncertain. However, the Stable Outlook reflects Fitch's current judgement that the risks around the economic outlook and hence Ireland's credit profile and ratings are broadly balanced. The rebalancing of the Irish economy is well underway, demonstrated by the forecast shift of the current account into surplus next year and recent strong performance of manufacturing and exports. However, the intensification of the financial crisis, combined with the headwinds from fiscal austerity and accelerated bank 'deleveraging', could stall the incipient recovery.

Ireland's 'BBB+' sovereign rating reflects still strong underlying fundamentals, including a high-value added, diversified and 'investment-friendly' economy as well as its modern history of debt service and social stability, and the relative security of fiscal funding from the EU-IMF. This is balanced against the severity of the banking crisis, fiscal challenge and a public debt burden that will reach levels that are substantially higher than is typical for similarly-rated sovereigns.

The downgrade of Ireland's sovereign ratings follows the conclusion of the review announced on 18 November and follows Fitch's previous downgrade of Ireland to 'A+' with a Negative Outlook on 6 October.
 

hammer

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5.83% is a killer :(

Fianna FAIL have failed this country. If we get past 2011 God only knows our credit rating.

BIFFO should bully FITCHs for answers as to how they would clean up HIS mess :)


BTW - Bertie on Budget day was an embarrasment. Big red face on him and the Fianna FAIL TDs stayed well clear of him. He is a major liability :)
 

DCon

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The head of the IDA is being interviewed live on CNBC now.

That'll sort all our woes
 

Cassandra Syndrome

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But, but, but Mr Lenihan and Mr Cowen said that all was good again on Tuesday. This cannot be true.
 

slx

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So, Fitch are, as usual closing the door months after the horse has bolted.

I really don't see the point of these agencies other than that they stir up market volatility.

After all, these are exactly the same people who were giving Anglo and Lehman Brother's AAA ratings a couple of years ago.

It's really hard to take them seriously.

They're about as useful as a weather forecast that tells you "it might have been cold last Wednesday"
 

pinemartin

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this is the same company that had Ireland at an A grade a few years ago even though the banks were lending money to anyone and the budget was dependent on stamp duty. We know we are in the soup , we dont need fitch to tell us that.
 

hammer

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Fitch are profitable
We are bankrupt

There economic model seems to work better than ours. Can we employ some of their staff in the Dept of Makebelieve
 

Baron von Biffo

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Austerity budget contribute to credit status downgrading.

Ratings agency Fitch has downgraded our rating to BBB+ partly based on the budget idiocy of slashing €6Bn out of the economy. A spokesman for the agency said on RTE News at One now that the increase from €3Bn to €6Bn and the promise of more to come was a factor in their decision.

Fail again for Lenihan.
 

kevmac

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Unbelievable how much longer can we try and keep any sort of credability around our banking "strategy". Fitch have done a great job in the past especially rating junk as AAA and lets on mention the conflict of interest they face when rating commercial bonds when they are paid by the issuers. If Fitch said it was raining soup they would have a knife.
 

feargach

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5.83% is a killer
As I've said, it makes zero sense to continue living in Ireland unless you, alone with a very large group of your fellow residents, lend to the state at a rate significantly lower than.

As you said, 5.83% is a killer. And if you're living here, the person being killed is you.

The only way to lower that figure is to lend to the state.

If you're too proud to do that, then it makes no sense to stay here.
 

Padraigin

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Ratings agency Fitch has downgraded our rating to BBB+ partly based on the budget idiocy of slashing €6Bn out of the economy. A spokesman for the agency said on RTE News at One now that the increase from €3Bn to €6Bn and the promise of more to come was a factor in their decision.

Fail again for Lenihan.


Exactly.

Passing the Debt Enslavement Deal will turn Ireland into junk bond status for the foreseeable future.

The market knows that this deal will put the Irish economy into a death spiral with no way to come out of it.
 


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