By Max Clarke
New York-based credit rating giant Moody’s has reduced Ireland’s investment Grade from Aa2- the 3rd highest Grade deemed “very low credit risk”, to Baa1, or “moderate credit risk”.
In light of Ireland’s tumultuous economic performance; in which a several banking crises converged, resulting in widespread public disenfranchisement with both the banks and with the government; and in which the government was ultimately obliged to accept an 85 billion Euro loan, a downgrade had been anticipated: but the severity of the 5 grade reduction- which now puts Ireland in the same category as Lithuania- has been surprising.
The IMF/ EU loan was granted with strings of budget austerity attached, and now the Government must shave off 15 billion Euros of spending- a measure which will likely further harm consumer confidence.
However, it is not all bad news across the Irish Sea: after 3 months of negative growth, strong exports have compensated for reduced consumer spending- paving way for growth of 1.7% in 2011.