City A.M. Reporter
MOODY’S yesterday stripped Ireland of its last AAA credit rating and warned Prime Minister Brian Cowen he needed to inflict more fiscal pain on his recession-wracked country or risk a further costly downgrade.<br /><br />Cowen has put Ireland on a five-year austerity diet after a debt-fuelled property binge transformed the former “Celtic Tiger” economy into one of the industrialised world’s worst performers when the housing market crashed.<br /><br />Moody’s said the government’s corrective actions and low debt levels before its economic meltdown meant that it needed to carry out only a moderate downgrade at this stage. But it cautioned that the downside risks outweighed the upside risks.<br /><br />The agency, which cut Ireland’s rating to “Aa1”, said it would be closely watching Cowen’s attempts to squeeze €4bn in savings in the next budget in December. But Moody’s signalled it would not follow rival Standard & Poors in a rapid round of downgrades.<br /><br />“A meaningful fiscal adjustment will require an additional structural improvement of Ireland’s primary budget balance,” said Dietmar Hornung, Moody’s senior analyst. “But at this juncture I don’t see imminent issues that would force us to change the rating in the short term.”<br /><br />The loss of the AAA altogether was expected after S&P’s cut its rating twice this year to AA.