The Irish Republic has had its credit rating downgraded by a leading ratings agency, Standard and Poors S&P.
S&P fears that the growing cost of propping up the countrys troubled banking sector will further weaken the governments finances.
It now thinks that the Irish government will spend 90bn euros $101bn; �74bn helping the banks, 10bn euros higher than previous estimates.
The countrys own debt agency described the analysis as flawed.
It claimed that S&Ps outlook was based on an extreme scenario of the cost of recapitalising the banks.
S&P cut the rating one step to from AA to AA-, its lowest since 1995.
This follows clearance earlier this month for an additional injection of 10bn euros into Anglo Irish Bank.
The agency now forecasts that net government debt - the sum of all borrowing - will rise to 113% of GDP in 2010.
This would make it one of the highest in the eurozone and well above its projections for Spain 65% and Belgium 98%.
The rating could be cut again if the costs of the bail-out rise or the economic recovery becomes more sluggish, S&P warned.
A lower rating can make it more expensive for the government to borrow money on the markets - vital for governments needing to finance large deficits.
Posts
