NEWS
12/07/2011 16:50 BST | Updated 11/09/2011 06:12 BST

Analysts Cut Irish Bonds To 'Junk' Status

Credit ratings agency Moody's downgraded Ireland's foreign and local government bond ratings to junk status on Tuesday, increasing the cost of borrowing in the country and putting further pressure on the eurozone.

Moody's said that the country would likely to need another bailout before its situation recovered.

Ireland's bonds were cut by one notch from from Baa3 to Ba1, and Moody's said the overall outlook remains negative.

Investors are likely to read the move by the credit-ratings agency as further evidence that the problems affecting the Greek economy could spread. Last month Moody's downgraded Portugal's ratings on similar fears, and there are now growing concerns about the situation in Italy and Spain.

In its statement Moody's recognised Ireland's economy for its "continued competitiveness and business-friendly tax environment", but said the government there would have to work hard before the agency would consider raising its rating:

Moody's Investors Service has today downgraded Ireland's foreign- and local-currency government bond ratings by one notch to Ba1 from Baa3. The outlook on the ratings remains negative.

The key driver for today's rating action is the growing possibility that following the end of the current EU/IMF support programme at year-end 2013 Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support, in line with recent EU government proposals.