Aug 242010
 

Here’s what S&P say in the preamble to their assessment of Irish sovereign credit rating.

  • The projected fiscal cost to the Irish government of supporting the Irish financial sector has increased significantly above our prior estimates.
  • We are therefore lowering our long-term sovereign credit rating on the Republic of Ireland to ‘AA-‘ from ‘AA’.
  • The negative outlook reflects our view that a further downgrade is possible if the fiscal cost of supporting the banking sector rises further, or if other adverse economic developments weaken the government’s ability to meet its medium-term fiscal objectives.

In layman’s terms this means Ireland is fucked.

The downgrade to ‘AA-‘ applies to other ratings that are dependent on the sovereign credit rating on Ireland, including the issuer credit rating on the National Asset Management Agency (NAMA), and the senior unsecured debt ratings on government-guaranteed securities of Irish banks.

This means NAMA and the bank guarantee have fucked Ireland.

S&P go on to say as follows:

The downgrade reflects our opinion that the rising budgetary cost of supporting the Irish financial sector will further weaken the government’s fiscal flexibility over the medium term. In light of the recent announcement of new capital injections into Anglo Irish Bank Corp. Ltd …  our updated projections suggest that Ireland’s net general government debt will rise toward 113% of GDP in 2012. This is more than 1.5x the median for the average of eurozone sovereigns, and well above the debt burdens we project for similarly rated eurozone sovereigns such as Belgium.

This also means Ireland is fucked.

We have increased our estimate of the cost to the Irish government of recapitalizing financial institutions to €45 billion-€50 billion (29%-32% of GDP) from €30 billion-€35 billion (19%-22% of GDP). These revised projections take into account the Irish government’s recent announcement that it will inject further capital into Anglo Irish bank, bringing the total authorized so far for that institution to €24 billion (15% of GDP). In our view, the total cumulative amount of capital injected into Anglo Irish by the government could reach €35 billion (22% of GDP) over time. The higher capital injections relate to the recognition of worse-than-expected deterioration in Anglo Irish’s asset quality. We believe similar developments could take place at some other Irish banks.

This is tech-speak for You’re fucked because you’re bailing out the crooked bankers.

So there you have it.  A highly-technical report boiled down to its essentials: we’re fucked.

_______________________

Previously on Bock

________________________

Jan 9 2009 : Ireland outlook rated “negative”

March 30 2009: Rating lowered to AA+

June 8 2009 : Rating lowered to AA

Dec 18 2009: Rating lowered to AA /A-1+.  Outlook negative

  22 Responses to “Standard & Poor’s Downgrade Ireland’s Credit Rating Again”

Comments (22)
  1.  

    Fuck.

    Disheartened, but not surprised.

    Would a good revolution (a lot like the one our friends in La France conducted in 1789) help to restore our rating, do you think?

  2.  

    BoldPilot

    No it wouldn’t.

    But it might put paid to gobshites like Standard & Poor and the people who pay them.

  3.  

    RB

    Are you suggesting that gobshites unknown are “shorting” our exchequer?

  4.  

    BP
    Yes

  5.  

    BP

    What about this Irish gobshite.

  6.  

    Déja Vu all over again. Shades of George Soros manipulation of the £STG a few years ago…

  7.  
  8.  

    BP

    “Déja Vu all over again. Shades of George Soros manipulation of the £STG a few years ago…”

    Yes.

    Except this time it’s the Euro.

    The money behind this is Wall Street. They “own” everything in the Western World.

    Soros didn’t have that much money. He knew the Bank of England (note, not Britain) had only so much foreign reserves left.

    Soros didn’t have the money. Wall Street did.

    Nigel Lawson was an idiot then just like Brian Lenihan is an idiot now.

    We will live to regret Brian Lenihan.

    This is not about Ireland or its problems.

    This is about the position of the US$ as the reserve currency. They cannot allow the Euro survive.

    If the USA cannot control the price of oil and all other commodities in dollars the USA is dead.

    That’s why the USA is in Iraq/Afghanistan/Pakistan/Saudi Arabia/Israel and any other country you case to name.

    If they can’t control the price of energy in US$ the USA ceases to exist.

    Hence Standard & Poor.

    Downgrade some shit and buy it for cents on the dollar.

  9.  

    I agree. Iraq was invaded because Saddam started trading his oil in Euros. That was the only reason for the entire disastrous adventure.

  10.  

    And that’s why the coup in Saudi Arabia was crushed.

    Prince Bandar was cosying up to the Russians (Gazprom).

    WW3 has either started or is about to get into full swing.

    Iran wants to trade oil/gas in Euros/Yen/Yuan.

    Yankee no like.

  11.  

    Is this the same Standard and Poors who gave good ratings to all those banks back before the crash which subsequently failed or turned into zombie banks ?

  12.  

    Doesn’t this reflect another deficiency in our finance department in that it failed to see this coming. They don’t seem to understand what’s happening in the wider financial game and now NAMA / ANGLO is looking like the most ridiculous of own goals. On top of that S&P are the Thierry Henri equivalent so this is turning into a right old piss take… (Ireland relegated – 3rd division?)

  13.  

    They saw everything coming, they just thought the poor ignorant Peasants wouldn’t understand or even worse; that we wouldn’t mind! Their “Frends in high places” had to be protected at all costs at the expense of the Health services etc. Ah sure, a lot of old people will die etc, but ” the people that matter ” i.e. the bankers, crooked politicians will be saved so’s they can enjoy the lifestyle they’ve become accustomed to!

  14.  

    Lets face it were fucked one way or the other, Then the dipstick John gormley tests the water by pissing on van drivers. but this time his piss turned to steam and nearly smothered the eejet. Then some other posh porker comes out and wants to dress our children in reflective school uniforms, which Lenihan will try to tax. It must be idea week in the dail, who ever comes up with the most stupid suggestion gets the jet for christmas.

  15.  

    The establishment economists who have collectively praised Lenihan for being “on top of his brief” were in short supply yesterday when S&P made its announcement. Meanwhile the likes of Conor”The Kebab” Lenihan,the obnoxious Frank Fahey and the unelected but ubiquitous Dan Boyle(another Bertie appointee)popped up at different times on the radio in an obviously choreographed,but pathetically lamentable attempt, at damage limitation with the simplistic assertion by all three that S&P “had got it wrong before.” Talk about clutching at straws.
    “On top of his brief”?!

  16.  

    Standard are Poor’s are right but for the wrong reasons. Their main reason is the bank debt. If it were just the bank debt that the government had loaded onto the country we would survive. The bigger issue is the failure to tackle the deficit.
    The problem is that, here again, the government wants to load the pain onto the little guys. It is doing this by cutting services, letting go temporary workers and increasing levies on the lower paid. There is a refusal to increase taxes on the better off or eliminate tax breaks for the better off. We need Scandinavian taxes to get out of this but they are not even being mentioned. The big boys are protecting each other. No surprises there.
    The Fianna Fail, me first, generation want somebody else to bear the pain, not themselves. People like ‘commit suicide’ Ahern , ‘Leave it on the table’ Flynn,Phone-e- expenses Callely, Water Taxi O’Donoghue do not believe that they were born to sweat and save. Why should they? They tried it on, got rich on it and got way with it. Mother Ireland me arse! That auld shite is for the likes of Pearse hanging up there behind me on the wall!

  17.  

    Why would Fianna Fáil act any differently (i.e. chance their arm at every opportunity)? Traditionally, they’ve always had enough die hard voters to keep them propped up. No other single party has ever had the numbers to kick them out, no matter what outrageous stupidity they’ve inflicted upon the country. People just keep coming back for seconds. Maybe, just maybe, they’ll finally get trashed in the next election. But I’m not holding my breath, the Irish have short memories when it comes to being fucked over by “their own”.

  18.  

    Look people – there’s a lot of smoke and mirrors going on here.

    S&P are not an independent ratings agency in anything but name – they are part of a small elite who’s purpose is to sequester as much of the planet’s wealth and resources as possible. Accurate forecasts are not their principle business – look at the ratings they were dishing out just before the first phase of this crash. It’s in the interest of the bond investors closely linked to S&P that the rating goes down and the bond yields go up. So long as we keep paying they’ll squeeze us for as much as they can. That’s the ‘free financial market’ in operation – charge whatever you think the (ideally captive) customer will bear.

    The utterly incurious media is reporting a ‘successful’ auction of government bonds this morning. €600m – pretty much chicken-feed in these days of tens of billions being spent on a single defunct bank. The question they don’t ask is who bought those bonds. An obvious candidate would be Irish banks – they are desperate that the boat is not rocked until they get a renewal of their guarantee. And 2% return over six months with zero risk is better way of screwing money out of the little people than investing in, say, indigenous SMEs.

  19.  

    This is going to turn into a feedback loop. It’s fairly obvious if you look at the numbers.

    It’s costing us around 5.3% interest (if I remember right) to service the national debt – a debt which is rocketing upwards because of the bailout. If Ireland is downgraded, that interest rate will go up because it’s considered a greater risk. Ergo, higher debt = more interest, higher rate = more interest, which will force the government to borrow more to run the country, which will make Ireland an even more risker prospect, which will affect the credit rating…

    And so it goes. The only end to this is to stop spending and increase taxes to cover the shortfall. The other option – that of halting all spending on the banks – doesn’t seem to be on the cards. So, public services will be cut, the middle class economic backbone of the country will be taxed into oblivion, and if we’re very, very lucky, Ireland will still be a viable nation at the end of it all.

    I still don’t understand why people are not more angry about this. Perhaps they think they will escape the bloodletting…

  20.  

    The circular nature of debt, borrowing more, interest increases, more debt, borrowing more certainly makes sense Claire. Tis a pity it does, but that seems to be the nature of government borrowing that can’t really be afforded.
    There is also another option to the ones you suggested (i.e. not to cover the shortfall) and that is to continue with deficit spending.. equating to more borrowing, more debt, etc etc. The U.S do that quite well I believe, but they have their own currency and eventually it’s best use will be in the bathroom.

Leave a Reply