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Ireland had its sovereign debt rating slashed for the second time in two months, and was warned it could face further downgrades after Standard & Poor's said it would cost more than expected to bail out the country's banks.
The Irish government has been forced to pump billions of euros into three banks and a building society. S&P warned: “The rating could be lowered again if asset quality in the Irish banking system deteriorates at a faster pace than we expect.” The ratings agency cut Ireland's score from AA plus to AA.
But Irish finance minister Brian Lenihan fought back, claiming his bailout plans were working.
“It should be recognised that their assessment reflects developments which have taken place over the last while and reflects market developments,” he said. “We have set out a budgetary strategy to deal with the challenges.”
Dublin is likely to need to tap bond markets heavily in coming months to cover its growing debt burden.
