Fitch downgrades Ireland

Fitch Ratings has downgraded the quality of Republic of Ireland's debt from AA- to A+ and placed the country on 'negative outlook', suggesting another downgrade may be on the horizon.

In its ratings system, a negative outlook implies a slightly greater than 50% probability of a further downgrade over a 12-24 month horizon.

Fitch said the outlook would be revised to 'stable' if there was evidence of economic recovery and fiscal consolidation. Conversely though, the agency warned that Ireland could be downgraded further if the economy stagnates and broad-based political support for and implementation of budgetary consolidation weakens.

Chris Pryce, director in Fitch's Sovereign Group the downgrade of Ireland reflects the exceptional and greater-than-expected fiscal cost associated with the government's recapitalisation of the Irish banks, especially Anglo Irish Bank.

Pryce said: 'The negative outlook reflects the uncertainty regarding the timing and strength of economic recovery and medium-term fiscal consolidation effort.'