9 Jun 2009

Irish debt rating cut again

3:54 pm on 9 June 2009

The sovereign debt rating of the Irish Republic has been cut for the second time this year.

Ratings agency Standard & Poor's has downgraded the rating on its government debt by one notch to AA, from AA+.

In March, the Irish Republic lost the top AAA rating as its public finances deteriorated amid a deep recession.

Standard & Poor's said the fiscal costs to the government of supporting the Irish banking system will be "significantly higher" than previously expected.

An emergency budget in April included a large rise in taxes and a cut in spending to deal with the budget deficit.

The Irish Republic has pumped 7 billion euros ($US9.7 billion) into its two biggest banks, Allied Irish Banks and Bank of Ireland.

Debt ratings on all of the banks in the Irish Republic were cut by another ratings agency, Moody's, after the budget.

Once known as the Celtic Tiger, the Irish Republic went into recession in 2008.

The BBC reports its budget deficit is expected to reach 9.5% of Gross Domestic Product in 2009, the highest in the European Union.

The outlook by Standard & Poor's on the Irish debt remained "negative", meaning that further downgrades are possible.