Barroso critical of move by ratings agency

 

EU REACTION:THE EUROPEAN Commission has attacked the “incomprehensible” decision by ratings agency Moody’s to downgrade Irish debt to “junk” status.

The credit-rating agency said on Tuesday that measures being contemplated by Europe for Greece had increased the chance that Ireland would default on its debts.

“[The] decision by Moody’s to downgrade Ireland’s credit rating is in the president’s view incomprehensible, and in the commission’s view of course,” the official spokeswoman for European Commission president José Manuel Barroso said.

The spokeswoman said the timing of the announcement, with the EU-IMF’s latest quarterly review mission preparing to announce its findings, was, “to say the least, questionable”.

Irish and European authorities had hoped that Moody’s would not follow through on an earlier warning that it would further downgrade Irish debt.

It was hoped that Ireland’s ability to date in meeting its targets on fiscal and banking reform under the EU-IMF deal would save it from the “junk” status fate already assigned by Moody’s to Greece and Portugal.

A spokesman for the Department of Finance said late on Tuesday that the downgrade by Moody’s was “a disappointing development” that was “completely at odds with the recent views of other ratings agencies”.

The other two major agencies, Standard Poor’s and Fitch, still assign investment-grade ratings to Ireland.

In an interview with RTÉ Radio 1’s Morning Ireland, Minister for Enterprise Richard Bruton said the downgrade was “frustrating” and would make recovery more difficult.

He added that the move did not reflect a failure on the part of the Government, but “uncertainty that has emerged as a result of different options that are being considered in Europe”.

Meanwhile, Minister for Finance Michael Noonan said Ireland would “continue to argue strongly” for a lower interest rate on its bailout loans and would not take for granted signals from Europe that it would make more flexible funding options available.

Speaking at a meeting of the Oireachtas Select Committee on Public Expenditure and Reform yesterday, Mr Noonan said he “did not anticipate any difficulty” with the current quarterly review of Ireland’s progress under the EU-IMF deal.

Mr Noonan reiterated his recent comments that the size of the budget cuts in 2012 may exceed the earlier target of €3.6 billion.

Also speaking at the committee meeting, Sinn Féin finance spokesman Pearse Doherty said Ireland’s meeting of EU-IMF targets “shouldn’t be the measure that the State is going in the right direction”.

The Moody’s downgrade of Ireland should serve as “a wake-up call” to the Government and to Europe, Mr Doherty said. “We are not going in the right direction.”

Moody’s view that Ireland would require a second bailout was “deeply, deeply damaging”, he added.

“I genuinely feel if we don’t get to grips with it, we are heading down a cul-de-sac and there’s only one end point.”