Ireland gets an A+, but could do better


As we slip down the table, Laura Slatteryexplains what financial rankings mean

IRELAND’S SOVEREIGN DEBT was downgraded by an international credit-rating agency this week, as Fitch Ratings decided there was a higher risk that the State might default on its swelling loans. Moody’s made a similar threat, concerned about our financial muscle after the latest banking bailout. And Fitch now gives Irish-issued debt an A+. Isn’t that good? And can’t we just ignore these guys?

AAA, Outlook Stable

Remember the good old days when your country had a triple-A rating? No? That’s because those days were so good that Ireland’s economic standing could be showered with gold stars and you didn’t even have to know about it. Ireland was the model student of capitalism, bluffing its way into a clique that included the US and several of our friends in Europe: by 2001 Ireland had won an AAA rating on its modest debt from all three credit-rating big boys: Standard & Poor’s, Moody’s and Fitch. But no one likes an arrogant protege.

AAA, Outlook Negative

Steady on, nouveau-riche debt-bingers. A negative outlook translates as “must try harder”. Soon you’ll likely be booted down to less-western credit ratings. In January 2009 the agencies started to shift their outlook on our debt to negative, citing emptying exchequer coffers. But who were they to criticise us, we asked – they’re only the geniuses who wrapped up Wall Street’s most toxic subprime debt parcels in shiny seals of AAA approval. But these were powerful idiots, proxies for the institutional investors who would beat Ireland up behind the bike shed if it dared to go there after dark.


You are now looking at a long stretch in detention, imposed by an autocrat you do not respect, while bullies steal your lunch money. Indeed, anything less than a perfect AAA and your right to function as a democracy will be questioned. In March 2009, when S&P cut Ireland’s rating to AA+, its analyst Frank Gill, in a rare example of simultaneous perceptiveness and gall, surmised there was a need for “new faces” in government. Labour’s Joan Burton said: “We are a country at their mercy.” The Taoiseach said: “I have no comment to make on the gentleman from the credit-ratings agency.”


Your country has sunk below the AA+ to AA- grades (or Aa1 to Aa3 in Moody’s parlance), entering the slippery slope of the single A. This happened on Wednesday, when Fitch knocked Ireland to A+. The agencies are no longer content with telling the Government to stay disciplined: they’re telling the Opposition to do so too. “Broad-based political support would help strengthen the credibility” of Ireland’s deficit-reduction effort, said Fitch. Michael Noonan of Fine Gael said, um, we don’t know if we support the Government’s fiscal plans, because they haven’t told us what they are yet.


By this point your country may be caught up in the “death spiral”. This is worse than it sounds. The death spiral is where a ratings downgrade increases the cost of borrowing, which drains the country of even more cash and sparks another downgrade. Fitch rates Greece, for example, as a BBB-. This is the last rung of what’s known as investment-grade debt, to which Fitch says Greece is clinging on to “by a fingernail”.

BB to D

Welcome to junk status. In this group you’ll find your partners in economic irresponsibility: Iceland and, according to S&P and Moody’s, Greece. These “speculative” ratings mean investors reckon there’s a high risk your country will default on its now immodest loans. Congrats: you’ve graduated from the school of bubble economics to a prison of dubious debt – but you’ll be among the world’s best-educated prisoners.