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Moody's may lift Irish downgrade threat

Friday, October 12 12:42:56

Global ratings agency, Moody's, has told the Wall Street Journal that it would consider removing the threat of a further downgrade to Ireland's rating if the EU were to directly bail out Ireland's banks.

Dietmar Hornung, a senior credit officer at Moody's, however, told the Wall St Journal that the country's weak economic outlook remains of major concern.

The Irish government hopes that the euro zone will refinance on easier terms a large part of the E64 billion costs the country borrowed over the past four years to save its banking system from collapse, the paper said.

Government ministers say a deal would help Ireland's efforts to finance itself entirely in the bond markets from 2014, after the last of its bailout loans are disbursed by the European Union and the International Monetary Fund in late 2013.

Mr. Hornung's comments offer hope that Moody's would revise its current negative outlook on Ireland if it secured a deal on bank-related debt, a move that would in turn boost Ireland's efforts to secure long-term financing at sustainable interest rates.

In July 2011, Moody's downgraded Irish government debt to non-investment or junk grade, and has maintained a negative rating outlook ever since. A negative outlook signals that the firm views it as more likely that its next move will be a downgrade than an upgrade.

However, Mr. Hornung stressed to the Wall St Journal that in setting "the framework" for any future rating decision, Moody's worries that Ireland's economic recovery could be derailed if demand for its exports from the euro area and the rest of the world weakens further.