Moody’s Investors Service on Tuesday cut Ireland’s credit rating to junk status, saying the country will likely need further official financing before it can return to international capital markets.
Chances that European policy makers will force the private sector to share the burden of future bailouts also weighed on Moody’s decision, as the agency believes that decision would drive borrowing costs higher for weaker euro zone members.
“The prospect of any form of private sector participation in debt relief is negative for holders of distressed sovereign debt. This is a key factor in Moody’s ongoing assessment of debt-burdened euro area sovereigns,” the ratings agency said in a statement.
Moody’s cut Ireland’s ratings by one notch to Ba1 from Baa3 and kept a negative outlook on the rating, which means further downgrades are likely in the next 12 to 18 months.