Irelands credit rating downgraded

Sand

Looks like Ireland is reaping the rewards of Fianna Fails hamfisted, rudderless response to the fiscal crisis:

DUBLIN, March 30 (Reuters) - Standard & Poor's downgraded Ireland's credit rating from the prized AAA ranking to AA+ on Monday and warned it could drop further in a vote of no-confidence in Dublin's efforts to get its public finances under control.
The rating agency said the Irish government had underestimated the scale of its fiscal problems and dismissed the possibility of a solution emerging at an emergency budget next week.
"The downgrade reflects our view that the deterioration of Ireland's public finances will likely require a number of years of sustained effort to repair, on a scale greater than factored into the government's current plans," S&P credit analyst David Beers said.
S&P said the rating could be lowered again if Ireland's fiscal position weakened substantially further.
"It just spells out the enormity of the task," said Rossa White, chief economist with Davy Stockbrokers. "It is unfortunate this has come in advance of it (the emergency budget)."
"It is important that there is a coherent plan."

S&P has downgraded Irelands credit rating

This is going to seriously affect Ireland borrowing ability, and the cost of that borrowing which is of major concern given the governments plan is to push things onto the long finger by borrowing to ensure they can keep the mercs and expense accounts they and their friends in the public service have become used to. Its also another sign that nobody, not the people of Ireland or the international markets, have any faith in Fianna Fails competence or ability to rescue the countries finances having spent wildly over the past 5 years. Its also going to have some implications for the Euro, which isnt going to win us any friends with the Germans and the rest of Europe given the "ourselves alone" attitude to the Lisbon Treaty not so long ago. Though they may feel forced to ensure the entire economy doesnt meltdown, there is going to be a price set and if we want to avoid IMF involvement there might not be any choice. Might be no harm to have some German efficiency imposed on the likes of Cowen and "the boys" though.

There really needs to be some out of the box thinking here to restore confidence in Ireland future. And I doubt anyone can believe Fianna Fail are seriously capable of that.

But S&P expressed doubt that Prime Minister Brian Cowen, whose approval ratings have nosedived as Ireland's economy contracts quickly, would be able to push through unpalatable spending cuts and tax hikes over the medium-term.
"We are concerned, however, that a credible multi-year fiscal consolidation strategy will not emerge until after the general elections, due by 2012," the agency said.

This basically recognises that Fianna Fail has no mandate - and they dont - and has to put pressure on Fianna Fail to either call a general election so that a government with a mandate can take over or at the very least form a national government with Fine Gael and Labour that properly recognises Fianna Fails lack of mandate in terms of sharing out the power.

FlutterinBantam

Yes, this is the first step on the slippery slope.

Be afraid.

Dr Galen

maybe it will now finally hit home to the great masses how screwed up we really are and how much has to be done. I await the mini budget with bated breath.....it's gonna get messy

Zynks

Sh!te!

mike65

If anyone was wondering how hard the budget would be...

humanji

A least it's not raining.

Alun

Is this the same S&P who rated bundles of essentially worthless securitized loans as AAA for their clients so they could be sold on to other institutions thus contributing to this mess in the first place? Oh the irony.

NewDubliner

George Soros: Britain may have to seek IMF rescue

Britain may have to go to the IMF for a huge financial bailout, the influential investor George Soros warns today.

The man who made $1 billion on Black Wednesday in 1992 told The Times that Britain was particularly vulnerable to the economic crisis.

Mr Soros – speaking days after an auction of government bonds failed for the first time in 14 years, ringing alarm bells about Britain’s ability to fund its growing debts – said that Gordon Brown might have to go begging for billions of pounds in international aid.

Not wanting to play down the problems, but everyone's getting a rough ride.

RealityCheck

I wouldnt panic just yet. I would give it another couple of months until we know for sure how screwed we are. The Emergency budget will have an awful lot to say about it. If it goes badly wrong again I thinks its curtains for us. Personally I think we will just about hang in there but only just. However the IMF wont be too far away.

Diogenes

Does this mean Cowen is going to call Ocean finance some time soon?

Darragh29

In fairness to all of us, S & P can't be all that smart when they gave us an AAA rating to begin with, based on inflated government revenues that were the result of an artificial property bubble. They were and remain a key part of the problem I think, not just for Ireland but all around the world.

Macha

Darragh29 wrote: »

In fairness to all of us, S & P can't be all that smart when they gave us an AAA rating to begin with, based on inflated government revenues that were the result of an artificial property bubble. They were and remain a key part of the problem I think, not just for Ireland but all around the world.

The S & P credit rating doesn't care where the money comes from: it's a rating that the money is there and that Ireland won't default on it's debts, along with levels of debt etc.

I love the way people were happy enough with S & P when we were on AAA but as soon as we go down a rating, suddenly the organisation's credibility starts to be questioned. You can't have your cake and eat it.

Akrasia

Alun wrote: »

Is this the same S&P who rated bundles of essentially worthless securitized loans as AAA for their clients so they could be sold on to other institutions thus contributing to this mess in the first place? Oh the irony.

yes it is, and yes, they are a shower of bastards, but much like the IMF, they are a shower of powerful and influential bastards, and this decision (which still over rates Irish debt imo) is going to have severe reprocussions for ireland (we're going to have a much much harder time selling bonds as many fund managers are prohibited from investing in anything other than AAA bonds and will now be forced to sell off their irish assets..

Darragh29

taconnol wrote: »

The S & P credit rating doesn't care where the money comes from: it's a rating that the money is there and that Ireland won't default on it's debts, along with levels of debt etc.

I love the way people were happy enough with S & P when we were on AAA but as soon as we go down a rating, suddenly the organisation's credibility starts to be questioned. You can't have your cake and eat it.

Well they should. If the money they are rating is not long term sustainable, and it was clear all along that it wasn't in the case of Ireland, then it shouldn't be used as the basis for giving a AAA rating.

Macha

Darragh29 wrote: »

Well they should. If the money they are rating is not long term sustainable, and it was clear all along that it wasn't in the case of Ireland, then it shouldn't be used as the basis for giving a AAA rating.

I agree with you. Sure they didn't even see Iceland's economic collapse coming.

I'm just pointing out that no one (particularly in political cirlces) had a bad word to say about them when we had an AAA rating.

swiss

This is unsurprising but very bad news. My fear is that this could lead to a flight of capital from Irish institutions if fund managers are forced to liquidate positions because of the new rating. It could make the 10bn flight from Anglo look like small change.

is_that_so

They were happy to ignore our problems as well as everyone else as long as we were on the crest of the boom, even though they issued warnings in 2007.

Ratings agency Standard & Poor's says both Ireland and Spain are likely to experience significant slowdown in GDP growth beginning in 2008
By Finfacts Team
Oct 22, 2007, 07:04


Ireland and Spain face a prolonged slowdown in economic growth, according to US ratings agency Standard & Poor's, as a drop in construction activity and consumer sentiment hits labour markets and weakens public finances.
...

The credit crunch and the recession that has come from it has exposed an awful lot of countries and a lot of businesses. I agree with their comment that no plan will come out of this budget.

This government is engaged in crisis management and I don't think we will get a credible plan out of them for what remains of the term, although if they survive to the next mini/emergency budget in October/December or three months' time and what we get next week has some or most of the desired effect they may come up with something.

Next week is on a wing and a prayer and the hope that we don't fall further into the abyss. I also agree there's no point knocking them There are certainly questions to be asked about how ratings agencies went about their business but until, such time as it is addressed they are the best we have.
Meanwhile the NTMA have been at work promoting us, although this was before yesterday's announcement.

March 27 (Bloomberg) -- The man who helped cut Ireland’s debt costs stemming from the days of chronic deficits in the early 1980s said investors are getting a “great bargain” from the government’s bonds following this year’s slump in prices.

The yield difference, or spread, between 10-year Irish debt and benchmark German notes soared to 284 basis points March 19, the highest level in at least a decade, as some investors shunned the securities. It was at 228 basis points today, compared with an average 18 basis points the past 10 years. The spread on similar bonds sold by France, also rated AAA, is 49 basis points. For the Netherlands, it’s 65 basis points.
...

jimmmy

Did Cowen and his cronies really think they could get away with paying themselves more , and get away with it ? Our Taoiseach is paid more than Obama or the UK prime minister or French or German President. Same story with our other politicians, central bank people etc. Do you remember the speech in the Point several years ago by the German ambassador, where he joked about the wages of our highly paid public servants here compared to Germany ? As I said before, no wonder our credit rating has been downgraded.

faceman

Darragh29 wrote: »

In fairness to all of us, S & P can't be all that smart when they gave us an AAA rating to begin with, based on inflated government revenues that were the result of an artificial property bubble. They were and remain a key part of the problem I think, not just for Ireland but all around the world.

The rating was justified at the time. There was plenty of cash in the government's piggy bank and we were running budget surpluses annually.

RealityCheck wrote: »

I wouldnt panic just yet. I would give it another couple of months until we know for sure how screwed we are. The Emergency budget will have an awful lot to say about it. If it goes badly wrong again I thinks its curtains for us. Personally I think we will just about hang in there but only just. However the IMF wont be too far away.

I dont mean this comment in anyway as an attack on you I believe that the wait and see approach is in some part to blame for us being in this predicament in the first place.

ejmaztec

We should start an Irish Diaspora Fund, where they could all chip in and put the economy back on track. Aren't there supposed to be about 70 million of them kicking round the planet? It wouldn't be the first time that emigrants' money was used to prop up the Irish economy, but this time we need generations of them.

Dannyboy83

It has begun.
The sh1tstorm has begun.

Monday week, we are all Married with children.