Ireland's credit rating downgraded

An Irish flag being waved in the air

TEXT OF STORY

STEVE CHIOTAKIS: S&P has downgraded Ireland's credit rating. Down to AA minus and the ratings giant said a worse grade could be coming. The moves throw into question Ireland's fledgling economic recovery and it once again exposes a catch-22
faced by several European countries.

The BBC's Rebecca Singer reports.


REBECCA SINGER: Standard and Poor's is worried about how much it's costing Ireland to help out its troubled banks. The agency's new calculations put the Irish bill at over $100 billion.

Richard Jeffrey from Cazenove Capital Asset Management says international financial markets aren't actually that worried about Ireland. They're wondering whether the same thing will happen to other countries.

RICHARD JEFFREY: There still are very extreme issues with public sector finances in countries like Greece, Portugal, to a lesser extent Spain, but then of course the contagion effect -- do we look at Italy do we look, do we look at France, and of course we've got to consider the U.K. as well.

Across Europe, governments are struggling with the problem of how to cut their spending without diverting too much money from a recovery. Ireland's downgrade reinforces the fact that finding the balance is a real challenge.

But the real test will come on Thursday, when Ireland tries to raise up to $750 million in debt -- the price the country gets will give a clear signal of what the market really thinks about its prospects.

In London, I'm the BBC's Rebecca Singer for Marketplace.

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