Irish credit rating cut by S&P

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The Irish Republic's top sovereign credit rating has been cut by Standard & Poor's (S&P).

The agency downgraded the rating on its government debt by one notch from AAA, the highest, to AA+.

S&P also put the Irish Republic on a "negative" outlook, meaning that further downgrades are likely.

The country is in a deep recession that has seen its public finances deteriorate. The government presents its emergency budget next week.

Construction slump

"The downgrade reflects our view that the deterioration of Ireland's public finances will likely require a number of years of sustained effort to repair, on a scale greater than factored into the government's current plans," the S&P analysts said.

The move means the ratings agency is less convinced that the Irish Republic can pay back its debt than previously.

The move is largely symbolic, though, as S&P still considers its borrowings to be relatively safe for now.

Once known as the Celtic Tiger due to the strong growth it enjoyed, the Irish Republic has experienced a sharp downturn, becoming the first eurozone country to fall into recession in 2008. It shrank by 2.3%, the first decline since 1983.

As a result, its budget deficit is expected to reach 9.5% of GDP in 2009, the highest in the EU and far above the EU rules of 3%.

The economy shrank by an annual rate of 7.5% in the last three months of 2008, the Irish statistics office said earlier this month, led by the biggest fall in construction on record.

Unemployment has nearly doubled, from 5% at the start of 2008.