Irish Credit Downgraded By Agency

Ireland's difficulties seem to worsen by the hour as Standard & Poor's announce they are downgrading the State's international credit rating and placing its banks on "CreditWatch".

The news comes just after another international ratings agency, Moody's, announced it would be slashing Ireland's credit rating, following the news of the Irish bailout.

Finance Minister Brian Lenihan has revealed that urgent action to keep the banks afloat will be taken within the next 72 hours.

It is understood the Government could resort to fully nationalising the AIB and Bank of Ireland after injecting yet more capital into the banks, leaving the State with majority ownership.

The measure is in response to another plunge in the share price of Ireland's banks as negative market reaction to the bailout takes hold.

It was thought the bailout would brake the selling off of Irish bonds, but the negative coverage and political turmoil has led to further uncertainty and Irish stock is being perceived as a greater liability.

The continued fall is also fueling fears of contagion spreading to other troubled nations, especially Portugal and Spain and who are both facing severe pressure to cut a high level of national debt as speculation grows for their need for a bailout.

Announcing their credit demotion today, Standard & Poor's said it was lowering its sovereign credit ratings on the Republic of Ireland and placing the ratings on CreditWatch with "negative implications".

"We believe that the fortunes of the Irish banking system have become very closely intertwined with those of the Irish sovereign and that the sovereign downgrade could have a negative impact on the creditworthiness of the four rated domestically owned

Irish banks, namely Allied Irish Banks, Anglo Irish Bank, Bank of Ireland and

Irish Life & Permanent. We also believe that there could be a negative impact, to a lesser degree, on the creditworthiness of the three rated foreign-owned Irish banks, namely Barclays Bank Ireland, KBC Bank Ireland, and Ulster Bank Ireland Ltd," a spokesman for the agency said.

The agency said Ireland's rating may be lowered again if negotiations over the International Monetary Fund (IMF)-European Union program or the December budget fail to ease a funding crunch.

Standard and Poor's added that they expected to publish a more detailed analysis and any

impact on the credit ratings on the seven banks as soon as permitted to do so under EU law.

(DW)