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S&P lowers Irish sovereign credit rating

Standard & Poor's, the renowned credit rating agency, has today announced a further downgrade on its rating for Irish sovereign debt amid signs that the government's banking bailout will be more expensive than initially thought. The rating was lowered to AA- which is three notches below the AAA that many governments around the world had enjoyed prior to the credit crunch and the worldwide recession. So what does this mean for the Irish authorities?

Ultimately the first impact will be on servicing debt and future auctions to investors with the authorities forced to offer a higher degree of interest. This will mean that more and more money from the Irish economy and the Irish government coffers will be used to cover interest payments thereby reducing the amount of funding available to inject back into the economy. There is some debate as to whether the Irish economy is on the edge of total collapse with some suggesting that recent tax rises and budget cuts may well be enough to save the situation.

However, others have suggested that Ireland is potentially "another Greece" for the European Union to sort out. Even though exports from Ireland are expected to increase over the next 12 months the degree of unemployment in the country is still uncomfortably high.

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