Irish debt deemed riskier

Concerns over the debts of European resurface. Rating agency Standard & Poor's considers debt now Ireland's most risky and has degraded the country's rating by one notch to "AA" to "AA-" (the fourth on a scale of 22). To make matters worse, the agency has placed the country under "negative watch", implying that a further revision of the note was not excluded in the medium term.

More than the Irish government's ability to reduce deficits, it is the health of the banking system of the island that worries Standard & Poor's. The financial situation worse than expected some institutions weigh on public finances. "The cost of the projected budgetary support by the Irish financial sector in the country has considerably increased compared to our initial estimates," Xinhua, which also supports the Irish strategy.

On 10 August the European Commission has authorized the Irish government to urgently inject 8.6 billion euros in the capital of Anglo Irish Bank. A sum that could be raised to 10 billion. "Given the recent announcement of new capital injections in the Anglo Irish Bank, our latest projections show that Ireland's public debt will increase to 113% of GDP in 2012, argued Standard & Poor's . "This is well above projected levels for countries that enjoy the same rating level, such as Belgium or Spain."

Stress tests are too soft

Ireland has reacted strongly after the decision to Standard & Poor's. The analysis of the agency "relies heavily on an extreme estimate of the cost of recapitalizing banks 50 billion euros, has criticized the agency managing the public debt."We believe that this approach is biased."

Investors, however, expected a further deterioration of the country score. "The cost of insurance against default risk of the Irish debt (or CDS for" Credit default swap) has recently increased in the markets, the degradation is therefore a confirmation that the markets have already seen, " Otis Casey remark, Vice President of Markit financial information agency.

For Glenn Maguire, chief economist at Societe Generale CIB, degradation of the note Irish and Anglo Irish Bank situation revives debate on European bank stress tests. The decision by Standard & Poor's "implies that" stress tests "should be more frequent and more stressful …" according to the economist.The European Commissioner for Economic and Monetary Affairs, Olli Rehn, has also suggested Tuesday that these operations could be organized more often.

In response to the deterioration of the Irish notes, interest rates on debt leapt on Wednesday morning. By midmorning, the rate at ten years Irish reached 5.414%, 5.358% on Tuesday night against the closure. In its wake, the rates in Spain and Greece in particular rose. Markets also eagerly awaited the results of a bond issue at 6 Portuguese and 10 years started in the morning.

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