Standard & Poor’s Downgrade Ireland’s Credit Rating Again

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


NAMA, SPVs and the National Debt – Fitch Downgrade Ireland’s Credit Rating

Remember last week that Yehudi Lenihan announced the creation of Special Purpose Vehicles (Spivs) so that the NAMA banking bailout wouldn’t appear on the balance sheet and therefore wouldn’t increase the national debt?

It was the same as shouting Look over there!

All the international institutions would be completely fooled and just not notice that the government was deepening the hole we’re in by €54 billion.

It was brilliant, except for those pesky meddlers in the Fitch rating agency.

Fitch are one of the agencies that determine our credit rating as a country, and yesterday they downgraded us again, this time by two whole notches, to “AA-‘ from ‘AA+’.

Among the reasons they gave was the debt burden associated from establishing the National Asset Management Agency (NAMA).

Damn!  They noticed. Better call the Minister quick.

Aaah, Brian?  About those Spivs?



OECD warning

Banker Mathews