The agency said it was cutting the rating to ‘A+’ from ‘AA-‘ due to what it called the greater than expected costs associated with the Government’s recapitalisation of the Irish banks, especially Anglo Irish Bank.
The agency has put a negative outlook on the rating, meaning a further downgrade is more likely over the next couple of years.Fitch said the negative outlook was due to uncertainty about the timing and strength of an economic recovery and efforts to cut the Budget deficit.
It also warned it could lower Ireland’s rating if broad political support for measures to tackle the public finances weakened.
Fitch said the Government’s four-year budgetary plan, due in November, would be a ‘key element’ in strengthening confidence in the sustainability of the public finances.
The International Monetary Fund has said that Ireland has no choice but to take strong and credible action to try to restore its finances.
The comments came at a news conference in Washington ahead of meetings of the IMF and World Bank in the city on Friday.
The Senior IMF Economist, Jorg Decressin, said the Irish economy was still struggling from the unwinding property boom and a banking crisis that was leading to market pressures on interest rates.He said the IMF supported the tough measures being taken by the Government.