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Ireland's economy downgraded by Standard and Poor's

The recent rollercoaster ride of the Irish economy touched a low point today with news that the sovereign debt rating on Irish government debt has fallen from "AAA" to "AA+" which is a significant downgrade for a country. Ireland is only the second Eurozone country to feel the wrath of the credit rating agencies with Spain losing its "AAA" rating just a short while ago.

While the downgrade may not look an awfully lot on paper in the real world this will increase debt funding costs for the Irish government in the future and make borrowing more expensive. This comes at a time when the Irish authorities are in desperate need of significant capital to try and refloat an economy which has collapsed of late. The banking system is in disarray, one of the major banks in Ireland has been nationalised and there are various ongoing criminal investigations regarding allegations of fraud.

All in all the Irish financial industry is in a real mess and there are renewed concerns that the government will at some stage need to go cap in hand to the International Monetary Fund. Despite a number of denials by the government there would appear to be limited options open in the short term and we may not have even reached the bottom of the current economic cycle!

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