Fitch Cuts Ireland’s Rating on Bailout Concerns

Deficit estimated to rise to a European record of 32% of GDP

Ratings agency Fitch cut Ireland's credit worthiness another notch Wednesday, citing the country's long fight to emerge from record deficits, the toughest bank-bailout effort in Europe and a lagging economy.

The Associated Press reports Fitch's downgrade to A+ from its previous AA- rating follows a similar move earlier this week by rival agency Moody's. However, the wire service notes both Moody's and Standard & Poor's still rate Ireland at the higher grade of AA2 and AA-, respectively.

The downgrade had an immediate negative impact on Ireland's borrowing costs on international bond markets. The interest rate, or yield, that investors demand to buy Ireland's 10-year bonds rose to 6.4% Wednesday for the first time this week.

APreports that Fitch said its downgrade and negative outlook—which places Ireland on review for a potential further downgrade—was a logical consequence of Ireland's stunning announcements on its debt crisis last week.

Finance Minister Brian Lenihan said Ireland's deficit this year will rise to a European record of 32% of GDP on the back of a bank bailout expected to total at least $61 billion, and potentially billions more if the Irish real-estate market doesn't stabilize.

To cope, Lenihan said Ireland in November would publish a four-year deficit-fighting plan and, the following month, unveil a 2011 budget that reduces the red ink. That blow appears certain to depress Ireland's already deflated, according to the wire service.

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