Ireland may need "new faces in Government", an analyst with debt ratings agency Standard & Poors said this morning.
Frank Gill, speaking a day after the agency lowered Ireland’s credit rating, also said Ireland had a “very low” chance of defaulting on its debt during an interview with Newstalk radio this morning.
Mr Gill said a change of Government may be required in an effort to stabilise the debt to gross domestic product ratio.
"It's likely that for there to be a buy in into what are going to be inevitable tax hikes in order to stabilise the debt to GDP ratio, you are going to need new faces in the Government. This is typically the case in the aftermath of an economic crisis," Mr Gill said
The GDP ratio may rise to above 9.5 per cent, according to the Government, more than three times the European Union limit.
Mr Gill's comments were alluded to by several TDs in the Dáil this afternoon during a heat debate on the state of the public finances.
Labour deputy leader Joan Burton said she was astonished by Standard & Poor’s comments about Ireland and its Government.
“I don’t think that’s any business of any foreign rating agency and I was one of the people who has called for such agencies to be reformed,” she told TDs during Leaders’ Questions.
She added: “These guys boosted everything on the way up and they’re negative about everything on the way down.
“They have some things about this country wrong. We have better prospects than they acknowledged. We are a country at their mercy.”
Fine Gael leader Enda Kenny asked Taoiseach Brian Cowen if he shared the views of the Standard & Poor analysts “who can change markets overnight”.
“Do you accept that you have failed to deal with the economic crisis?” he asked.
“You have presided over a disastrous banking system, a calamitous loss of competitiveness and you should go.”
But Mr Cowen said: “I have no comment to make on the gentleman from the credit ratings agency. I don’t know what he knows about Irish politics or what the choices are.”
He insisted that the Government has taken action at every opportunity to correct the public finances and maintain competitiveness. He said nobody could give a date for an upturn in the global economy.
Mr Cowen told the Dáil that Exchequer figures for March, due out on Thursday, are down in line with January and February.
Ms Burton estimated that the drop from the AAA to AA rating would cost half a percentage point due to higher borrowing rates.
“The cost for this year could be 500 million euro and it could be double that for the whole of next year,” she said.
Ireland has lost its prized “AAA” credit rating from Standard & Poor’s, which yesterday downgraded its outlook for the Irish economy, blaming the deterioration in public finances.
In a move that will make the cost of Government borrowing more expensive and put further pressure on the economy, Standard & Poor’s lowered Ireland’s rating from AAA, the top rating possible, to AA+.
The downgrade was a “wake up call,” said Jim Power, chief economist at Friends First. “We shouldn’t shoot the messenger but take the message”.
The credit ratings agency said the new rating was on a “negative” outlook, indicating that the State’s faltering tax revenues may result in further downgrades.
Analysts at Standard & Poor’s said the worsening public finances would “require a number of years of sustained effort to repair” and that they believed that additional public support would be necessary to prop up the Irish banking system, beyond the €7 billion that has already been committed.
Fine Gael deputy leader and the party’s finance spokesman Richard Bruton said this morning “people now believe that those who led us into this problem do not have the confidence of the public to lead us out”.
“A number of top banking personnel have already been replaced. Now we have evidence that international rating agencies feel the same way about the Government,” he added. “What is needed now is a new government with a new mandate to take the country in a new direction. This would send a clear signal to the international markets that Ireland is under new management.”