Fitch downgrades Ireland's debt

Ratings agency Fitch said today it was downgrading Ireland's credit rating by three notches, citing the cost of bailing out the banking system.

The agency said it was cutting the country's long-term foreign and local currency issuer default ratings to BBB+ from A+. The outlook on the rating is stable, it said.

"The downgrade reflects the additional fiscal costs of restructuring and supporting the banking system," Fitch said.

"The scale and pace of the deterioration of public finances, continuing contingent fiscal and macro-financial risks emanating from the banking sector, combined with the highly uncertain economic outlook and loss of market access, means that Ireland's sovereign credit profile is no longer consistent with a high investment grade rating.

"Ireland's continued investment grade status is underpinned by the EU-IMF external support, as well as the Irish government's demonstrated commitment to fiscal consolidation and still strong underlying economic fundamentals."

The latest cut puts Ireland at the same level as countries such as Libya and South Africa. However, Ireland's rating is still two steps above Greece, which was the first EU country to accept a rescue plan from the EU and IMF, and has a rating above Iceland, which defaulted on its debts in 2008.

However, although Fitch analyst Chris Pryce said the three-step cut reflects the "seriousness of the situation", he also said he doesn't expect Ireland to default.

Other agencies have also downgraded the country's rating in recent weeks. On November 23rd, S&P cut Ireland's rating by two levels.

The yield on Irish 10-year bonds remained below 8 per cent this afternoon, at 7.973 per cent at 2.23pm.

Fitch also downgraded notes issued by the National Asset Management Agency (Nama) to BBB+ from A+.