Fitch Ratings stripped Ireland of its top AAA credit rating today, and the Government warned it could end up with majority stakes in the country's lenders.
Fitch cut Ireland's AAA ratings by one level to AA-plus, the second highest, citing a severe economic downturn taking a "heavy toll" on public finances.
Fitch also said it holds a negative outlook for Ireland, suggesting more cuts may come.
"The outlook for Ireland's public finances and fiscal risks is no longer consistent with an 'AAA' rating," Fitch said in a statement.
But a downgrade from Fitch following a similar move by Standard & Poor's will raise the cost of borrowing additional funds overseas.
Fitch said in its statement that Ireland's GDP is expected to decline by 8 per cent in 2009, and Government revenues may fall by 16 per cent, following similar declines in 2008.
The yield on Irish 10-year bonds rose to 5.35 per cent compared with 5.31 per cent in early afternoon trade.
"We had AAA. Today they brought their rating to AA-plus," John Corrigan, director of Ireland's national pension fund, told reporters.
Reuters