Ireland likely to need further bailout funds – Moody’s
Ireland will need more bailout funds when its current programme ends next year, according to Moody’s, the only credit-rating agency to have downgraded the country to junk.
Ireland was the first bailed-out euro country to make a successful return to borrowing on financial markets, enabling it to slice around €10 billion off its post-bailout funding requirements, but Moody’s said yesterday it might still need more precautionary loans.
Most analysts believe that having progressively hacked away at a January 2014 ‘funding cliff’ – the only bond redemption due in the 12 months following its aid programme – Ireland can raise enough cash to cover the rest of its funding for the year.
However Moody’s, which stripped Ireland of its investment grade status in July last year, said a number of key factors still supported its junk rating of the country.
“Ireland has made preliminary steps in an attempt to return to markets on a sustained basis, from which it had been excluded since October 2010,” Moody’s said in its annual credit report on Ireland.
“The rating agency expects that the end of Ireland’s current EU/IMF support programme at year-end 2013 will prompt the need for official financing being available, possibly in the form of a precautionary programme.”
The Government has insisted it will not need a second bailout.
Ireland’s government debt is nevertheless precariously poised to peak at around 120 per cent of gross domestic product next year and Moody’s said its Ba1 rating reflected a big deterioration in the government’s financial strength following a costly bank bailout and severe economic contraction.
Moody’s said its outlook reflected the risks to the country’s deficit-reduction plan from continued weakness in the Irish economy and complications wrought by the broader euro area debt crisis.