RTTNews - Moody's Investors Service on Wednesday downgraded Ireland's government bond ratings to Aa1 from Aaa, with a negative outlook.
The rationale behind the downgrade stems from three key drivers of our credit analysis regarding debt: affordability, financeability and reversibility -- which for Ireland are weakened as compared to Aaa peers, Moody's said.
The firm said the negative outlook reflects the risk of a further gradual deterioration in terms of both of debt affordability, the share of government revenues used for interest payments, and financeability, the cost at which Ireland can raise further debt. Overall, Moody's expects the debt dynamics to remain unfavorable for several years, with the downside risks outweighing the upside risks in the near to medium term.
The pronounced weakness in the economic activity has been translating into a severe deterioration of Ireland's public finances, and the country is set to emerge from the current economic crisis with a considerably higher debt burden for the foreseeable futureDietmar Hornung, a Vice President - Senior Analyst in Moody's Sovereign Risk Group said.
Moreover, the firm said the debt reversibility would hinge on the country's capacity to adjust both in economic and fiscal terms. The strength of the economic recovery will depend on Ireland's capability to restore competitiveness, particularly to reduce nominal wages -- which are currently among the highest in the eurozone, Moody's said.
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