Moody's is actively monitoring the incoming government's attempts to win easier terms for its loans under an EU/IMF rescue deal and signalled today that another rating cut is not imminent.
The agency slashed Greece's credit rating earlier today on fears the country's efforts to cut its debts will fall short, heaping further pressure on EU leaders to ease its repayment terms as part of an EU-wide solution for the region's debt crisis.
Moody's cut Ireland's rating by five notches to Baa1 in December and put the country on negative outlook, meaning more downgrades could follow, amid fears further bank losses will hit the public purse and further weaken economic growth prospects.
"The negative outlook reflects ... risks in the next 12 to 18 months. We are currently monitoring how things develop in Ireland and we will act when deemed appropriate," Dietmar Hornung, vice president and senior credit officer at Moody's, told Reuters in an interview.
Incoming taoiseach Enda Kenny has less than three weeks to persuade Europe's paymaster Germany to reduce the interest rate on the European Union's €40 billion plus contribution to the €85 billion EU-IMF bailout and give Dublin more time to restructure its banks before a hoped-for EU-wide deal on the debt crisis is hammered out at a March 24th summit.
Mr Hornung said he would assess the impact of any concessions Ireland might be able to win from Europe but said he did not expect the overall targets in the EU-IMF deal to be altered.
Ireland's new government said over the weekend it would adhere to the fiscal goals laid down in the agreement.
"I don't expect the broad framework as laid out in the EU-IMF package will be changed. Certainly from an Ireland perspective if there were changes to the interest rate that could reduce the debt burden somewhat," Mr Hornung said in a telephone interview.
"The current Baa1 rating is on the basis of the EU-IMF support package as it is and if there are amendments we will look into them."
Ireland has pledged to shrink its budget deficit, currently proportionally the highest in the euro zone, to 9.4 per cent of gross domestic product (GDP) this year from nearly 12 per cent last year but weak consumer demand could hamper its goal.
Tax revenues in February were below target but Mr Hornung said it was too early to say whether Dublin would miss its fiscal target this year.
"Certainly we do have the austerity and growth issue in Ireland and the feedback effect on government revenues are all things that need to be looked at and that is what we are doing," he said.
Reuters
