Ireland’s credit rating now lowest since 1995

The Irish Times has some of the political reaction to the increasing cost of the Irish state’s borrowing following Standard & Poors decision to downgrade Ireland’s credit rating to AA-.  And a BBC report notes

S&P cut the rating one step to from AA to AA-, its lowest since 1995.

This follows clearance earlier this month for an additional injection of 10bn euros into Anglo Irish Bank.

The agency now forecasts that net government debt – the sum of all borrowing – will rise to 113% of GDP in 2010. That would be a substantial increase on the 64% level recorded in 2009.

It would also make it one of the highest in the eurozone and well above its projections for Spain (65%) and Belgium (98%).

The rating could be cut again if the costs of the bail-out rise or the economic recovery becomes more sluggish, S&P warned, but could rise if the position unexpectedly improves.

And on that rising cost of borrowing, The Daily Telegraph‘s Ambrose Evans-Pritchard argues

Dublin has played by the book. It has taken pre-emptive steps to please the markets and the EU. It has done an IMF job without the IMF. Indeed, is has gone further than the IMF would have dared to go.

It has imposed draconian austerity measures. The solidarity of the country has been remarkable. There have no riots, and no terrorist threats.

Yet as of today it is paying 5.48pc to borrow for ten years, or near 8pc in real terms once deflation is factored in. This is crippling and puts the country on an unsustainable debt trajectory if it lasts for long.

Yet Greece is able to borrow from the EU at 5pc and from the IMF at a staggered rate far below that (still too high for the policy to work, but that is another matter). These were the terms of the €110bn joint bail-out.

To add insult to injury Ireland is having [to] SUBSIDIZE Greece to meet its share of the rescue fund.

Ah, but Brian Cowen is a seriously respected world leader…

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  • Cynic

    A Guide for Tourists to Ireland

    Ireland is an island to the west of Britain but Northern Ireland is just off the mainland – not the Irish mainland, the British mainland.

    The capital of Ireland is Dublin . It has a population of two million people, most of whom will be shopping in Newry this afternoon. They travel to Newry because it is in the North, which is not part of Ireland , but still pay in Euros.

    Under the Irish constitution, the North used to be in Ireland , but a successful 30-year campaign of violence for Irish unity ensured that it is now definitely in the UK . Had the campaign lasted longer the North might now be in France .

    Belfast is the capital of Northern Ireland . It has a population of half a million, half of whom have houses in Donegal. Donegal is in the north but not in the North. It is in the South. No, not the south, the South.

    There are two parliaments in Ireland . The Dublin parliament is called the Dáil, (pronounced “Doyle”), an Irish word meaning a place where banks receive taxpayers’ money.The one in Belfast is called Stormont, an Anglo-Saxon word meaning placebo, or deliberately ineffective drug.

    Their respective jurisdictions are defined by the border, an imaginary line on the map to show fuel launderers where to dump chemical waste.

    Protestants are in favour of the border, which generates millions of pounds in smuggling for Catholics, who are opposed to it.

    Travel between the two states is complicated because Ireland is the only country in the world with two M1 motorways. The one in the North goes west to avoid the south and the one in the South goes north to
    avoid the price of drink.

    We have two types of democracy in Ireland . Dublin democracy works by holding a referendum and then allowing the government to judge the result. If the government thinks the result is wrong, the referendum is held again. Twice in recent years the government decided the people’s choice was wrong and ordered a new referendum.

    Belfast democracy works differently. It has a parliament with no opposition, so the government is always right. This system generates envy in many world capitals, especially Dublin .

    Ireland has three economies – northern, southern and black. Only the black economy is in the black. The other two are in the red.

    All versions of the IRA claim to be the real IRA but only one of them is the Real IRA. The North’s biggest industry is the production of IRAs. Consequently, we now have the Official, Provisional, Continuity and Real IRA. The Real IRA is by far the most popular among young graffiti writers simply because it is the easiest to spell.

  • Mack
  • Pete Baker


    That’s linked, and quoted, in the original post.

  • John East Belfast

    It is going to get a lot worse when the European Central Bank raises the Base Rate as a result of a powering ahead Germany.

    ROI Govt borrowing rates will be in double figures and the lion’s share of ROI taxpayers receipts will be simply serving the interest on debt

  • I am seriously embarrassed to think I ever supported F/F, may they pay a high price at the next election.


    Brilliant analysis.

  • Mack

    Oops, missed that, thought it was all BBC at first glance..

  • Alias

    It’s going to get much, much worse. The banks are issuing moratoriums to delinquent borrowers left, right and centre so that those loan defaults don’t show on their books. That makes the banks look much healthier than they actually are (and they already look terminally ill). The government is colluding in the fraud so that the gullible public can be hoodwinked into underwriting all of the eurosystem debts by the simple expedient of not telling the public the extent of the debts they are underwriting, and underestimating them. The government is also fraudulently failing to classify the debts dumped into NAMA as national debt, thereby understating the true figure for borrowing as a percentage of GDP. But the good news is that Brian Cowen will be offered a plush EU job after his domestic political career expires at the next general election as his reward for forcing Irish taxpayers to bail-out the eurosystem, so that’s No 1 looked after.

  • That’s funny, Cynic. Also much of it is unfortunately true.

  • aquifer

    ROI should attack S&Ps credibility and present directly to big lenders.

    Start by having a look at the ratings they gave subprime loan packages, comparing them to their present prices.

  • aquifer

    Daily Telegraph:

    ‘”In terms of the specific analysis by S&P, this is largely predicated upon an extreme estimate of bank recapitalisation costs of up to €50bn,” Ireland’s National Treasury Management Agency said. “We believe this approach is flawed.”

  • A.N.Other

    Highest default probabilities;

    The Irish do not riot, because deep down, they all still believe that it was the Brits that did it. The fact that the austerity measures are designed to rescue the negligent banks that were hijacked by a corrupt cartel is neither here nor there.

  • Robo

    Ireland is relatively new to the idea of lavish public spending, part of the Tiger years that people feel it was a passing phase.

    Everyone ‘knew’ the economy was overheated, wages too high, property prices too high. People had been waiting for the bubble to pop for years. No one knew how it would end, but everyone knew it would.

    I think that is why there were no riots. People broadly agree with the Dublin governments analysis.

  • Mack

    So where does this leave those who howled about massive cuts being the only way to solve the deficit problems. It seems not only have they helped to further impoverish hundreds of thousands of Irish and UK people, it has also led to Irelands credit rating going south.

    Those who said such talk was nasty twaddle to make the economically disadvantaged pay for an economic crises which was not of they’re making, demand an apology, or at least a little modesty.

    What next, don’t tell me, if only the cuts were deeper all would be well.

    While we are at it and as I am feeling a little smug, remind me, what rating did these agencies give those pure gold corporations before they went bust and dragged the whole caboodle down with them?


    You come at this problem from the wrong end, wages to high, lavish public spending, I must have missed that, did Ireland have the best health care system in the world, education system perhaps? WWW in every corner of the land, free to use?

    In any case public spending was not the main reasons for the economic collapse, as someone recently said to me, those who believe that are in moron territory. That is what the arseholes who wish to make the common man pay for their mess want you to believe. Its crap mate, why dance to the boss classes tune, it is a sour song.

  • Wasted Ballot

    Poor Ireland, I almost feel sorry for those people that over borrowed and over spent all these years.

    I’m shocked that the trolls haven’t been in stating a united Ireland would solves all these problems. Because as we all know, it would make the world such a better pluck

  • Wasted Ballot

    Shite, that should be place…

  • percy

    well done that’s quite brilliant.
    reminded me of cricket rules,

    Maybe the orange folk will unite with the Green,
    as themmuns is good at business innit.

  • Mack


    Well the ratings agencies were calling for *more* cuts yesterday according to Brian Lucey when he was interviewed on newstalk.

    They downgraded Ireland because they increased their estimates of the cost of bank bailout dramatically. Something I’ve always opposed. It is totally unfair to foist those costs on ordinary working people.

    About those cuts. Public Sector workers in Ireland earnt about 48% more than private sectore equivalents and around 20% when adjusted for experience, qualifications etc.

    If you think it fairer to tax lower paid workers more than cut the salaries of higher earners – then you don’t know what fair means.

    And by the way raising taxes on someone on €50k to pay top-end ps salaries at €100k is just as wrong and immoral as raising taxes on someone on €20k in the private sector to pay a public sector employee doing the same job €28k or whatever.

  • Gerry Lvs Castro

    But a UI WOULD solve all these problems and more — the powerhouse economy of NI would be a huge boost to the impoverished south, millions would be saved by preventing those pesky shoppers nipping into Newry and SFs world renowned economic policies could really shine.

    Not to mention all the extra jobs and cheap housing in the north with the orangies jumping ship to Scotland.

    Can’t come soon enough.

  • “If you think it fairer to tax lower paid workers more than cut the salaries of higher earners – then you don’t know what fair means.”


    It could be some of the wages in the private sector were to low, especially at the bottom end of the wage scale, for as you know the average workers wage in the private sector stagnated over the last 15 plus years. Anyway the way your government is going about things and that of the UK, this type of grade will not be earning more in the public sector than the private, as many will have been made bloody redundant.

    As to the above, you know dam well that is not what I mean, so do not come up with such Cleggite shit with me. You backed a nasty, horse which hit or penalized those least able to afford cuts, some of whom are the most vulnerable section of society, so it is a bit late to go all progressive now.

    As to raising tax on 50K salaries, I have yet to hear anyone seriously suggesting that, but we certainly should start with people earning more than 70k and again at 100k and so on up after all, we are all in this together, ‘surely’ ? Of course this is unlikely to occur as it would hit those this government is there to serve; and prove in the process, those massive cuts over a short period of time were totally unessential, immoral and maybe disastrous.

    This was said at the time but you refused to listen, blinded by rating agency crap and god knows what else.

  • Mack

    or as you know the average workers wage in the private sector stagnated over the last 15 plus years

    In America not in Ireland. Anyway private sector wages being too low doesn’t change the morality of pushing up tax rates on less well paid workers to support higher wages of better-off workers.

    No full-time employee has been made redundant in the public sector. I’d rather have seen steeper wage cuts and increases in the numbers employed. But it was not to be.

    As to raising tax on 50K salaries, I have yet to hear anyone seriously suggesting that

    The top marginal rate, was raised by a whopping 10% on income above €36k in Ireland. There were those arguing for a further 10 on top of that..

  • Anon

    Ready to admit a deflation cycle yet?

  • I heard on the dreaded Fox News that the agencies were considering lowering the US credit rating. The consensus seemed to be that the agencies would not dare because they are all based in the US and influence is all. If only…

  • Mack

    In all seriousness where did I say that wasn’t a possibility?

    A monstrous credit bubble bursts. Bankrupt country goes bankrupt, movie at 11.

    By the way – do the maths approx. €3bn in cuts. €90bn bailing out the banks + God knows what in reduced lending, increased savings etc. Where does the deflationary tsunami come from…

  • Alias

    Mick Hall, the debt problems created by mismanagement of Ireland’s macroeconomic and monetary policy and regulation of the financial sector by the EU are conflated in the europhile media with the debt problems created by mismanagement of Ireland’s fiscal by the indigenous gombeens to create the impression among the public that all of the problems are indigenous and not related to EU governance. It is presented that Ireland’s financial woes and forthcoming bankruptcy result from Bertie and Biffo’s spending fetish and inability to plan beyond the next general election and not from policies that were devised by those who actually govern Ireland’s macroeconomic and monetary policy. While wages and other costs inflated during the period when the ECB’s macroeconomic and monetary policy was aggressively expansionist, that was a direct result of too much money in circulation and not a result of a domestic policy to inflate costs. The government, by increasing pensions and other entitlements, was responding to inflationary pressures in the economy and not leading them. However, they get the blame in the media because it is policy that EU governance should proceed by stealth and that where it is in the public domain that it should only be in instances where it can be claimed that it was beneficial to the national interest rather than utterly destructive. The well-documented fiscal mismanagement did not add several hundred billion to the national debt beyond the government’s decision to protect those eurosystem lenders who are owed hundreds of billions by eurosystem lenders in Ireland to whom they recklessly loaned their money. Most of that hundreds of billions lost by eurosystem lenders in Ireland was lost when the EU’s expansionist monetary policy caused too much money to chase too few investment opportunities, thereby creating bubbles in every sector of the Irish economy. It is lost and gone forever, but will now be repaid over 50 or perhaps 100 years by Irish people generating hundreds of billions in new wealth so that no German or French eurosystem lender loses a cent of what was lost before the government retrospectively guaranteed every cent of it. So just as too much money in circulation causes inflation, too little money causes deflation. The benefits that went up must now go down, alas. And again the government will be responding rather than leading. The pressures, of course, are more that economic indicators: they’re the EU telling the gombeens to cut public spending in order to have funds available to repay the French and German bondholders whose reckless lending they retrospectively guaranteed.

  • Jay

    Great post!!

  • Anon

    You stated you didn’t believe Ireland is in one a little while back.

    Unless something is done Ireland will enter into a runaway debt spiral. I can’t see how they get outof this now without leaving the Euro, or allowing some of the guaranteed debt (made by private companies, not the Irish state) to collapse.

  • Mack

    Ok. Well, I don’t know if Ireland has entered a debt deflation spiral yet or not. It’s getting closer though, much closer..

  • vanhelsing

    My favourite post ever on Slugger…:) simply superb C

  • “mismanagement of Ireland’s macroeconomic and monetary policy and regulation of the financial sector by the EU are conflated in the europhile media with the debt problems created by mismanagement of Ireland’s fiscal by the indigenous gombeens to create the impression among the public that all of the problems are indigenous and not related to EU governance.”

    Very interest comment, the conflating of these issues has not only occurred in Ireland, but right across the EU, especially in the UK and Greece. What is becoming clear is Capital is using this economic crises to demolish the welfare State. There really is some bad people out there and just because some of them are photogenic, wear smart clothes and father children and arrange for them to be born in picturesque locations, does not make it any less so.

  • Mack

    Jesus wept!

    Alias is promoting an anti-EU agenda. Always has, always is. He wants to pin blame for the crash on the EU and allow those who fueled the bubble at home to walk away Scot-free.

    The analysis that Irish fiscal policy had no effect on the credit bubble – that it merely followed it, not led it, is facile bollocks. (As is the argument that the people who ramped up social spending in Ireland now want to ‘dismantle the welfare state’ and commit political hari-kari while they are it).

    There was a feed back loop – the credit bubble facilitated increased pro-cyclical spending and tax cuts, which in turn facilitated greater private sector borrowing, which in turn facilitated increased pro-cyclical etc.. ad infinitum (or mid-2006 )

  • drumlins rock

    how about a Re-United Britian? that is a much more economically sensible option!

  • Mack

    That’s pretty much what they’re doing. They did manage a bond auction today with lower yields than 2 weeks ago, so maybe it’s working…

  • ‘dismantle the welfare state’

    I cannot not talk much about the Southern economy, etc, but it is certainly not bollocks as far as the UK is concerned, the British PM has said his governments aim is a smaller state and the big society, by which he means charities do much of the things the state does today when it comes to social welfare, just as they did in the 19th century and we all know where that led. Where the UK goes today Ireland follows.

    Indeed whenever a rightwing politician cuts the state as your neo liberal mates in the Bush administration claimed they would, the opposite happens and it grows like topsy. whilst they attack and demonise those who have become unemployed, sick, disabled, homeless or elderly or serve their country working in the public services, it allows big business to get their snouts firmly into the public purse, witness the US departments for defence and prisons, or whatever they are called over there.

    To deny that the UK and Irish governments have not conflated the issues alias mentions is bollocks and absolute bollocks. Mack your hatred for the welfare state is expressed in your language, ramped up social spending etc, this seems to have been some sort of crime in your eyes, most of us see that as a good thing, tax payers coin well spent.

    OK Alias is anti EU, which I do not agree with, but unlike you he never hinds this under some pretext or other, he shouts it from the hill tops.

    You’re a knowledgable fellow about economics, but you seems to me to be in a ridged mindset which in truth is traditional and reactionary. If we are going to get through this recession, we need to think outside of the cuts, cuts box, otherwise our societies will not be worth living in. We will end up completely in a swamp where we will have a top ten percent of the extremely wealthy, 20% doing good 30% struggling to get by and 40% living in extreme poverty and ignorance with all that breeds and there will not be enough gated communities to go around.

  • JJ malloy

    Is the Eurosystem to blame for our present predicament?

  • Glencoppagagh

    This would be a much more interesting and useful thread if posters took the time and time and trouble to express their thoughts clearly.
    Mickhall’s last post is worthy of Dave Spart but he’s not the only one.
    If I understand it correctly, he’s advocating that taxation should bear the entire brunt of deficit correction and that it should only be imposed on the extremely wealthy, however he defines them. Why not just go all the way and demand confiscation of assets?

  • Glencoppagah,

    Nationalisation without compensation, now there’s a thought, if you give me an inventory of what you own, I will let you know if I have you in my sights 😉

  • Glencoppagagh

    Sadly, my assets wouldn’t cover the cost of a senior barrister’s legal aid habit for more than a couple of months.

  • Glen

    Mine neither,

    All the best

  • Glencoppagagh

    Well at least you appear to agree that at least one item of public expenditure could be cut.

  • ouch 😉

  • Suilven

    Anglo Irish announce a loss of E8bn+ for H1

    IRE Sovereign CDS spreads up 140bps since start of the month

    S&P may have a legacy credibility problem, but the ROI government’s credibility problem is ongoing…