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Credit downgrades add to Ireland’s woes

Sinn Fein candidate Pearse Doherty, center, celebrates with Sinn Fein President Gerry Adams after winning a parliamentary seat in Donegal, Ireland, on Friday. (Associated Press)
Sinn Fein candidate Pearse Doherty, center, celebrates with Sinn Fein President Gerry Adams after winning a parliamentary seat in Donegal, Ireland, on Friday. (Associated Press)

Ruling party’s majority down to two seats

DUBLIN, Ireland – Ireland’s banks suffered a string of credit downgrades Friday – one reduced to junk-bond status – as speculation mounted that an EU-IMF bailout of Ireland could require senior bondholders to share the massive bill.

Prime Minister Brian Cowen saw his own hold on power slip another notch, as his ruling Fianna Fail party lost a special election for a long-empty seat in parliament. The winner vowed to force Cowen from office before he can pass an emergency 2011 budget being demanded as part of the international rescue.

The New York-based Standard & Poor’s credit ratings agency said it was lowering Anglo Irish Bank six notches to a junk-bond B grade. It also cut the ratings on Bank of Ireland one notch to BBB+, and downgraded both Allied Irish Banks and Irish Life & Permanent one notch to BBB.

The agency said bonds issued by Anglo are particularly at risk of being discounted as part of a $113 billion loan to Ireland by the European Union and the International Monetary Fund. It says Ireland “may be forced to reconsider its current supportive stance toward Anglo’s unguaranteed debt.”

Anglo gambled most recklessly on runaway property markets in Ireland, Britain and the United States using money borrowed from overseas, and was the one that triggered Ireland’s plunge toward bankruptcy in 2008. It was nationalized last year and represents a bill to the taxpayer of at least $38 billion.

In the northwest county of Donegal, an Irish nationalist who has vowed to vote against Ireland’s austerity plans won a seat in parliament, cutting Cowen’s majority to just two seats.

Sinn Fein candidate Pearse Doherty said his dominant win, taking nearly 40 percent of votes in a six-candidate field, showed that people want to elect a new government that will force foreign banks, not Irish taxpayers, to bear the cost of Ireland’s financial crisis.

Doherty earlier this month successfully sued the government over its 17-month refusal to permit an election in Donegal, a delay reflecting Cowen’s fear his party would lose.

Voters “are telling Brian Cowen to get out of office. It’s not clear that this budget will pass. It is completely unfair and unjust to attack the weakest and most vulnerable in this society,” Doherty said. “The government should suspend the budget, call a general election, and let the people have their say.”

Cowen is unveiling an emergency budget Dec. 7 that he and European officials say must be passed to clear the way for the EU-IMF loan.

The Irish Times reported that a loan announcement was expected Sunday, but Irish and other officials called that report premature.

Cowen has already offered to hold an early national election sometime in February or March – but only once all budget measures have been approved in parliament.

The 2011 budget seeks to slash $6 billion from spending and add $2 billion in new taxes as part of a four-year plan to reduce Ireland’s annual deficits to 3 percent of gross domestic product in 2014.

Ireland’s 2010 deficit is running at 32 percent of GDP, the highest in Europe since World War II. Two-thirds of the deficit comes from Ireland’s bailout of its banks under terms of a state guarantee to bondholders that the government can no longer finance.


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