Earlier today Moody's finally woke up from its slumber, threatening it would do a "multi-notch downgrade, albeit one that would leave the country still with an investment grade rating", which the people who have made a business model of being behind the curve said is now the most likely outcome of the review of Ireland's sovereign credit rating. Moody's (which rates Ireland Aa2 and has the country on review for downgrade) said that an aid package from the European Union and the International Monetary Fund would shift the burden of supporting Ireland's banks onto the Irish sovereign, and would therefore be "a credit negative for Ireland." Apparently bankruptcy is not covered under the "credit negatives" for Ireland. And while what Moody's does or thinks is completely irrelevant, what the Irish Green party (whose prior opinion we presented in a very distinct clip last night) has announced it will quit the Irish government in January, leaving PM Brian Cowen without a majority in the government, and leaving the door open for elections, and thus a complete undoing of the bailout. Looks like yesterday's announcement will be the shortest rescue in history. CDS is already seeing that, as Irish CDS was last seen lifting offers of 520 and wider, after a 507 close on Friday. And Futures already following the action. It will be another busy day for Brian Sack.
On the Green Party abdication:
Ireland’s Green Party will quit the government after next month’s budget is passed and talks with the European Union on an aid plan are completed, leaving Prime Minister Brian Cowen without a majority in parliament.
The Green party plans to support the government’s budget and wants an election in January, leader John Gormley said at a press conference in Dublin today. Irish voters “feel misled” by the government, he said.
Ireland yesterday became the second euro-region state to ask for external help after surging costs to bail out the country’s banks pushed up the budget deficit and eroded investor confidence. The aid, which Irish officials said as recently as Nov. 15 they didn’t need, marks the latest blow to Cowen’s popularity, which has plunged as he raised taxes, cut public workers’ pay and pumped billions of euros into lenders.
“I suppose it’s not very surprising. It’s clear that the public are very fed up,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. “We need elections sooner rather than later. It makes sense for them to support the budget and then walk away.”