The ageing Irish population is threatening to put severe pressure on the Republic's public finances and its AAA credit rating, Standard & Poor's, the rating agency, warned yesterday.

The warning, which comes as a number of industrialised countries grapple with pensions crises, underlines the growing importance of age-related spending when judging the creditworthiness of government debt.

S&P said Ireland needed to put into effect concerted policy and fiscal reforms to avoid a deterioration of its public finances stemming from rises in age-related spending.

Without these reforms, the Republic's credit rating could head into the "junk" or sub-investment grade over the next couple of decades.

Trevor Cullinan, credit analyst at S&P, said that without further reforms, total age-related public expenditures in Ireland would rise to 20.9 per cent of gross domestic product in 2050, up from 11.2 per cent in 2005.

"In this scenario, general government deficits and net debt will begin to accelerate quite sharply even by 2010, accelerating thereafter and remaining buoyant until the middle of the century as larger cohorts enter retirement age," he said.

The potential fiscal deterioration would mean that Ireland's credit rating would fall from AAA into the AA category after 2015, dropping further into the A and BBB categories by 2020 and 2025 respectively. In 2030, Ireland's debt would be more typical of that associated with speculative-grade-rated sovereigns.

But S&P said such a scenario was not a prediction and pointed out that it was "highly unlikely" that governments would allow debt and deficit burdens to spiral out of control. - (Financial Times service)