Monday, March 30, 2009

Wonder when Britain will be downgraded?

Ireland Loses AAA Rating at S&P on Deficit, Slump

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Posted by flintster1994 @ 05:32 PM (2863 views)
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16 thoughts on “Wonder when Britain will be downgraded?

  • britishblue says:

    Ireland is up the creek without a paddle. Because it is part of the Euro it can’t lower interest rates, it can’t stimulate its economy, it can’t become more competitive through a devalued currency and its ‘new’ big brothers in the EC aren’t going to bail it out. Instead they are waiting on the sidelines to see if it goes the way of Iceland and leave it to the IMF. This is the real reason why the German chancellor doesn’t want extra fiscal stimulus because they don’t want to pay for ailing EC member countries. I still have a hunch that there is going to be some kind of break up in the EC in next six months and we are going to see sterling re gain some ground against the Euro. From what I understand it is almost impossible for a country to withdraw from the Euro in the short term, but Ireland is getting slowly boiled alive by being in it. It desperately needs to devalue its currency.

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  • little professor says:

    With Dell pulling out, the only real employer left in Ireland is Fyffes. Ireland is now literally a banana republic. All that talk about the “Celtic Tiger” was just bluster – the boom was built entirely on borrowed money, inflated asset prices and speculation.

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  • little professor says:

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  • Ireland is suffering from an over-dependence on construction and related industries, on US inward investment (declining for obvious reasons) in a small number of industries for its exports of manufactured goods and on exports of services related trade and finance. The sectors that contributed to its 6% growth rates until recently have started to work in reverse. I suppose small “tiger” economies ride booms in a limited number of sectors and get hit harder by busts.

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  • little professor says:

    Standard & Poor’s on Monday downgraded Ireland’s credit rating by one notch to AA+, with a negative outlook, meaning further downgrades in the near term are likely.

    The downgrade reflects our view that the deterioration of Ireland’s public finances will likely require a number of years of sustained effort to repair, on a scale greater than factored into the government’s current plans.

    We expect that the Irish economy will materially underperform the Eurozone economy as a whole over the next five years, recording minimal growth in real and nominal GDP during the period.

    As a result, we believe that Ireland’s net general government debt burden could peak at over 70% of GDP by 2013, a level we view as inconsistent with the prospective debt burdens of other small Eurozone sovereigns in the ‘AAA’ category.

    A complicating factor, relating to Ireland’s membership of the Eurozone, is the prospect that Irish wages and prices will rise more slowly (or even decline for an extended period) relative to the rest of the monetary union. Already, as the unemployment rate rises toward 10%, nominal wages are being cut sharply in both the public and private sectors.

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  • Eyes_wide_open says:

    How many times is Little Professor going to comment on his own post *yawn*

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  • But he didn’t post it ???

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  • charlie brooker says:

    For sure Ireland is in a very bad way but if the rating’s agencies’ credibility has all ready been busted why does anyone view this downgrading with credibility?

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  • Gnaeus Pompey says:

    Some Irish civil servent probably got cheap at one of their many lunch junkets with the S&P boys. Probably thought only three bottles of the ’83 Margeaux would swing the AAA.

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  • What about Post Office savings?

    If Ireland do an Iceland, the savings aren’t protected and the UK can’t use terror laws to freeze assets.

    Would you draw the money out?

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  • charlie brooker – The problem was that rating agencies were rating products for clients who actually created those products (structured securities) using openly available models – think caveat emptor with regards to a house purchase, would you listen to the seller’s surveyor’s free advice or take the estate agent’s word for the quality of the plumbing? I think that the agencies are still regarded highly when it comes to corporate and sovereign debt where the client has no way to fit the instrument to the agency model, and I think they may even have been making some inroads into the problematic cases too. When it comes down to it the purchasers of structured products should have been doing their own assessment as well anyway!

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  • Gnaeus Pompey – he he… it is possible I guess!!

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  • oops!! better close this url properly – there we go.

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