I’m not particularly keen on the current Irish government, but “this”:http://www.irishtimes.com/newspaper/breaking/2009/0331/breaking59.htm seems a bit much:
Ireland may need “new faces in Government”, an analyst with debt ratings agency Standard & Poors said this morning. Frank Gill, speaking a day after the agency lowered Ireland’s credit rating, also said Ireland had a “very low” chance of defaulting on its debt during an interview with Newstalk radio this morning. Mr Gill said a change of Government may be required in an effort to stabilise the debt to gross domestic product ratio. That ratio may rise to above 9.5 per cent, according to the Government, more than three times the European Union limit. Ireland has lost its prized “AAA” credit rating from Standard & Poor’s, which yesterday downgraded its outlook for the Irish economy, blaming the deterioration in public finances. In a move that will make the cost of Government borrowing more expensive and put further pressure on the economy, Standard & Poor’s lowered Ireland’s rating from AAA, the top rating possible, to AA+.
I wouldn’t have thought that this was an especially opportune moment for credit rating agencies to start throwing their weight around given their major contribution to the ongoing crisis, but even in normal times, this would have struck me as serious over-reach. Credit rating agencies are purely private bodies, with an awful lot of political power. In theory, they impartially pronounce upon the perceived riskiness of lending to particular debtors, putting money in particular deals and so on. In practice, their decisions often prove to be quite political. But rarely as political as this. I don’t think that this comment can be interpreted as anything but a statement that Standard and Poor’s willingness to improve Ireland’s credit rating is dependent on the Irish Dail and Irish voters kicking the current government out. That’s a very dubious – and very political – action for a purportedly neutral and technical body to be taking.
Update: Thanks to nnyhav in comments for pointing to this “later story”:http://www.irishtimes.com/newspaper/finance/2009/0401/1224243794208.html.
Reacting to S&P’s decision to cut the Republic’s rating, economists and market analysts yesterday homed in on its concern that there would not be a credible plan for the public finances until after the next election. Mr Gill told The Irish Times that the statement was not meant to question the State’s leadership, and simply reflected the challenge facing the Government and the uncertainty surrounding the banks. He also stressed that a AA+ rating was still broadly positive. “That is a very high rating and this suggests an extremely low probability of default,” he said.
I originally thought that this looked like a walkback rather than a clarification and said as such – then I saw that the Irish Times had changed their original story (without saying that they were doing this) to include the full quote which appears considerably more ambiguous than the original story implied.
Mr Gill said a change of Government may be required in an effort to stabilise the debt to gross domestic product ratio.
“It’s likely that for there to be a buy in into what are going to be inevitable tax hikes in order to stabilise the debt to GDP ratio, you are going to need new faces in the Government. This is typically the case in the aftermath of an economic crisis,” Mr Gill said
The GDP ratio may rise to above 9.5 per cent, according to the Government, more than three times the European Union limit.