Wednesday, August 25, 2010

Ireland stung by S&P downgrade

DUBLIN: Ireland's financial headache worsened on Wednesday, Aug 25 after Standard & Poor's cut its credit rating in a move criticised by the country's debt management agency.

In a strongly worded statement, the National Treasury Management Agency said it disagreed with S&P's view that Ireland faced substantially higher costs to bail out its ailing banking sector.

"In terms of the specific analysis by S&P, this is largely predicated upon an extreme estimate of bank recapitalisation costs of up to 50 billion euros," the NTMA said.

"We believe this approach is flawed."

Concerns over the final bill for purging Irish banks of bad debts clocked up in a decade-long property binge have pushed Ireland back to the centre of the European debt crisis and it is viewed as the second riskiest euro zone country after Greece.

The premium investors demand to hold Ireland's 10-year bonds over German bunds'' has been steadily widening in the past few weeks and remained elevated at 327 basis points on Wednesday.

The spread finished at 330 bps on Tuesday, its highest level since the Greek financial crisis broke in May. - Reuters

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