Ireland debt = Junk

According to ratings agency Moody’s.  From the Irish Times report

While Ireland still carries investment-grade ratings with rival agencies Standard Poor’s and Fitch, the downgrade creates big new obstacle for the Government’s plan to exit the EU-IMF bailout programme and start borrowing from debt markets again next year. Only investors with a very large appetite for risk buy junk-rated bonds given the higher implied risk that the issuer may default, or fail to pay back the debt.

A spokesman for the Department of Finance said: “This is a disappointing development and it is completely at odds with the recent views of other rating agencies.”

The spokesman said it was “difficult to see” how the downgrade reflects moves to enhance the fund’s flexibility expressed by euro zone finance ministers on Monday night.

The spokesman for EU economics commissioner Olli Rehn said the commission regrets Moody’s decision. “It contrasts very much with the recent data, which support a return to GDP growth this year, and the determined implementation of the programme by the Irish government, which has taken strong ownership of it.”

The downgrade came at the end of a day on which EU internal markets commissioner, Michel Barnier, said he would propose “stiff measures” in November to curb the power of the agencies. “We were surprised that the agencies would downgrade a country without any warning,” he said, referring to a similar downgrade of Portugal last week.

News leaked yesterday about a summit before EU leaders agreed through diplomatic channels to meet in Brussels, putting them under pressure to calm markets by quickly agreeing a new rescue plan for Greece.