WASHINGTON (MNI) – The following is the text of a statement by
Standard & Poor’s Tuesday saying it has lowered Ireland’s long-term
ratings to ‘AA-‘ from ‘AA':

Standard & Poor’s Ratings Services said today that it lowered its
long-term sovereign credit rating on the Republic of Ireland to ‘AA-‘
from ‘AA’. At the same time, the ‘A-1+’ short-term rating on the
Republic was affirmed. The outlook is negative. The transfer and
convertibility assessment remains ‘AAA’, as it is for all members of the
European Economic and Monetary Union.

The downgrade to ‘AA-‘ applies to other ratings that are dependent
on the sovereign credit rating on Ireland, including the issuer credit
rating on the National Asset Management Agency (NAMA), and the senior
unsecured debt ratings on government-guaranteed securities of Irish
banks.

“The downgrade reflects our opinion that the rising budgetary cost
of supporting the Irish financial sector will further weaken the
government’s fiscal flexibility over the medium term,” said Standard &
Poor’s credit analyst Trevor Cullinan. In light of the recent
announcement of new capital injections into Anglo Irish Bank Corp. Ltd.
(BBB/Watch Neg/A-2), our updated projections suggest that Ireland’s net
general government debt will rise toward 113% of GDP in 2012. This is
more than 1.5x the median for the average of eurozone sovereigns, and
well above the debt burdens we project for similarly rated eurozone
sovereigns such as Belgium (98%; Kingdom of; AA+/Stable/A-1+) and Spain
(65%; Kingdom of; AA/Negative/A-1+).

After a decade of rapid credit growth, which in our view greatly
increased the risk profile of Irish banks, the Irish government has
adopted what we view as a proactive and transparent approach to dealing
with the financial sector’s difficulties. We believe this should help
foster a gradual recovery of the Irish economy over the medium term.
Nonetheless, we believe that the government’s support of the banking
sector represents a substantial and increasing fiscal burden, which in
our view will be slow to unwind.

We have increased our estimate of the cumulative total cost to the
government of providing support to the banking sector from about E80
billion (50% of GDP; see “Ireland Rating Lowered To ‘AA’ On Potential
Fiscal Cost Of Weakening Banking Sector Asset Quality; Outlook
Negative,” published June 8, 2009, on RatingsDirect), to E90 billion
(58% of GDP). For details on how our 2010 estimate of Ireland’s general
government debt compares to official estimates, see Standard & Poor’s
commentary “Explaining Standard & Poor’s Adjustments To Ireland’s Public
Debt Data,” also published today.

Our estimate includes two main components: the upper end of our
estimate of the capital we expect to be provided by the Irish government
to improve the solvency of financial institutions, and the liabilities
we expect the government to incur in exchange for impaired loans
acquired from the banks.

We have increased our estimate of the cost to the Irish government
of recapitalizing financial institutions to E45 billion-E50 billion
(29%-32% of GDP) from E30 billion-E35 billion (19%-22% of GDP).

“The negative outlook reflects our view that the rating could be
lowered again if–as a result of its support for the financial sector or
due to a more sluggish economic recovery–the government’s fiscal
performance improves more slowly than we currently assume,” said Mr.
Cullinan. Conversely, the outlook could be revised to stable if the
Irish government looks more likely to achieve its fiscal target for the
underlying general government deficit of less than 3% of GDP by 2014, or
if the banking sector stabilizes more quickly and at a lower fiscal cost
to the government than we now think likely.

** Market News International Washington Bureau: 202-371-2121 **

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