Moody’s downgrade ‘excessive’ — Cowen

IRELAND’S credit rating has been cut five notches by Moody’s on the basis that the austerity measures could dampen economic growth and domestic demand.

While analysts at the credit rating agency said that it was very unlikely that Ireland would default on its debt, they gave the country a negative outlook for the future.

Taoiseach Brian Cowen described the downgrading from Aa2 to Baa1 as “a bit excessive”, commenting from an EU summit in Brussels.

“Moody’s downgrade is disappointing, it is excessive. It’s already mostly factored in by markets as Fitches downgraded us already. But it is disappointing that they gave a negative rather than the stable outlook (Fitches gave) which was a fairer approach,” he said

He added that Moody’s made some positive comments about the budget strategy working and recognised the country’s commitment to growth.

Moody’s analyst Dietmar Hornung said in a Bloomberg interview: “The austerity measures could have feedback effects on economic growth, on domestic demand and that’s something that should be monitored,” adding it was very unlikely Ireland would default on its debt.

“Ireland has managed high levels of indebtedness in the past and shown political cohesion and commitment to enacting difficult fiscal consolidation measures. The Government is making considerable investments in its banking system that might ultimately generate income,” he added.

Meanwhile Dublin-based Glas Securities, commenting on the downgrade, said: “While a downgrade had been anticipated, the severity of the downgrade is surprising”.

The grade is the same level as Lithuania and Russia and three levels above junk or non-investment grade.