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DUBLIN Reuters Irelands financial headache worsened on Wednesday after Standard & Poors cut its credit rating in a move criticized by the countrys debt management agency.

In a strongly worded statement, the National Treasury Management Agency said it disagreed with S&Ps view that Ireland faced substantially higher costs to bail out its ailing banking sector.

In terms of the specific analysis by S&P, this is largely predicated upon an extreme estimate of bank recapitalization costs of up to 50 billion euros, the NTMA said.

We believe this approach is flawed.

Concerns over the final bill for purging Irish banks of bad debts clocked up in a decade-long property binge have pushed Ireland back to the center of the European debt crisis and it is viewed as the second riskiest euro zone country after Greece.

The premium investors demand to hold Irelands 10-year bonds over German bunds has been steadily widening in the past few weeks and remained elevated at 327 basis points on Wednesday.

The spread finished at 330 bps on Tuesday, its highest level since the Greek financial crisis broke in May.

Brenda Kelly, an analyst at CMC Markets, said she expected Irish borrowing costs to climb on the back of S&Ps move.

I think we are going to have to an awful lot more in interest payments, she said.

Although Ireland has raised virtually all of the 20 billion euros of long-term debt targeted for 2010, S&Ps move may make it more difficult for the countrys banks to extend the maturity of their funding later this year and eventually wean themselves off a state guarantee on their debt.

The NTMA will auction treasury bills worth between 400 million and 600 million euros on Thursday as part of a regular sale of short-term paper.

S&P cut Irelands long-term rating by one notch to AA-, the fourth highest investment grade, and assigned the country a negative outlook late on Tuesday saying the cost to the government of supporting the financial sector had increased significantly.

Rating agencies have been steadily hacking away at Irelands credit rating and S&Ps is now on a par with Fitch and one notch below Moodys, which cut its rating to Aa2 last month.

S&P said it expects Ireland will need to spend 90 billion euros to support its banking system, up from its prior estimate of 80 billion euros including capital used to improve the solvency of financial institutions and losses taken from loans the government acquired from banks.

Irelands budget deficit ballooned to 14 percent of gross domestic product, the highest in Europe, last year due to the cost of propping up nationalized lender Anglo Irish ANGIB.UL and it could climb higher if Dublin injects an additional 10.05 billion euros into the bank.

Irelands central bank governor said last week that the final bill for Anglo could be between 22-25 billion euros, though the cost of bailing out the lender would not increase debt to an unmanageable level.

Editing by John Stonestreet

MELBOURNE Reuters BHP Billiton, the worlds biggest miner, reported a 47 percent rise in second-half profit on Wednesday, in line with analysts forecasts, after a sharp rebound in iron ore and copper prices.

BHP, which has made a $39 billion hostile bid for top global fertilizer maker Potash Corp, said it was cautious on the short-term global outlook and that the Chinese economy, its biggest customer, would slow from recent highs.

Net profit before one-offs for January-June rose to $6.77 billion from $4.59 billion a year earlier, compared with analysts forecasts for around $6.9 billion, according to a survey of 13 international brokers.

BHP is targeting Potash Corp with a $130 a share offer to power its next phase of growth, launching into a completely new market for the global miner, which has made some of its shareholders nervous.

BHP shares have dropped 6.8 percent since announcing the bid a week ago, heavily underperforming a 2.6 percent fall in rival Rio Tinto, as investors are worried about the risks BHP is taking on with the bid.

Reporting by Sonali Paul; Editing by Valerie Lee

WASHINGTON Reuters Central bankers from around the world will assess a darkening economic outlook at their annual U.S. mountain retreat this week with discussion of printing yet more money to spur growth on the agenda.

Federal Reserve Chairman Ben Bernanke is likely to signal his views about the uncertain prospects for the worlds biggest economy but he probably wont give many clues on whether the U.S. central bank will pump more cash to keep the recovery going.

Other top central bankers will arrive in the Jackson Hole resort with concerns, too.

European Central Bank President Jean-Claude Trichet faces his own challenge of a two-tier recovery.

While the euro zone economy as a whole has strengthened thanks to strong German growth, the ECB looks set to keep providing banks with unlimited funds at a fixed rate to help banks and governments in Europes troubled periphery.

Bank of England and the Bank of Japan officials will come to the Teton mountains likely to talk about how they might have to push more money into their economies to stimulate growth, a last resort when benchmark interest rates approach zero.

Its not just the U.S. that stalled in June and July, its the world economy that hit a wall over the summer months, said Ellen Zentner, a U.S. economist for Bank of Tokyo-Mitsubishi UFJ in New York.

The likely mood of concern among the central bankers heading for the wilds of Wyoming contrasts with the optimism of a year ago, when debate at Jackson Hole centered on ways to wean economies off emergency support as they emerged from recession.

The discussions give the worlds top central bankers a chance to thrash out the major challenges of the moment as well as hike on trails in the scenic national park.

Past roundups have come at economic turning points: the start of the credit crisis in 2007, the days before Lehman collapsed in 2008 and before the start of the recovery in 2009.

Chicago Federal Reserve Bank President Charles Evans said Tuesday that the risks of a double-dip U.S. recession have risen in the last six months. While he added he did not think that was the most likely scenario, he said high unemployment and a fractured housing sector would make the recovery a fragile one.

EYES ON BERNANKE

Bernankes speech Friday will be a keystone of the three-day conference, which has chosen as its theme the challenges of the next decade. His audience will be listening keenly for clues about shorter-term support for the economy.

The Fed said on August 10 it would buy Treasury bonds with proceeds of maturing securities in its massive portfolio. It had been letting its balance sheet shrink naturally, effectively removing some of its huge stimulus.

This wasnt the right time to send a signal that we would be allowing a tightening to take place as these securities rolled off our balance sheet, Dallas Fed President Richard Fisher told Fox Business Network Tuesday.

The big question now is whether the Federal Reserve will start buying Treasury bonds more aggressively again to provide the U.S. economy with a new injection of cash.

The Wall Street Journal said Tuesday that more senior Fed officials than previously thought voiced concerns about or objections to the relatively modest move to use mortgage debt maturities to buy Treasuries at the August 10 meeting.

The reported split within the central banks upper echelons suggested the Fed could stand pat after rebalancing its balance sheet and set a high bar for any further asset purchases.

Under these circumstances, it would be premature for Chairman Bernanke to provide a set of guideposts for future policy moves, as helpful as that would be for the markets and as much as we believe that additional easing will ultimately be needed, analysts at Goldman Sachs said in a note Tuesday.

Instead, we expect him to concentrate on how the economy and the Fed have come to where they are now, with at best just a general sense of economic risks in the months ahead.

Reporting by Mark Felsenthal; Editing by Kim Coghill