Fitch Puts Ireland On Rating Watch Negative

Fitch said….
“Fitch Ratings has today placed the Republic of Ireland’s ‘AAA’ Long-term foreign currency Issuer Default Rating (IDR) on Rating Watch Negative.
The rating action reflects recent disappointing news on government revenue performance which points to very sharp declines in tax receipts across the board in January and February. This will intensify the policy challenges facing the government as it seeks to tighten fiscal policy further than anticipated in the midst of a steep recession and raises the risk of fiscal slippage.
In the first two months of this year revenues were again below the already low expectations built into the government’s January forecasts. In response to these forecasts Government took action designed to produce savings this year of EUR2bn and thereby reduce the government’s deficit to 9.5% of GDP. The latest information suggests, in the absence of any further Government action, the 2009 deficit could be increased by another EUR4bn, equivalent to over 2% of GDP, implying a revised deficit of 11.5% – 12%. The Prime Minister has said that new tougher measures on both taxation and public expenditure to rectify the further slippage in the fiscal position will be announced and a supplementary Budget is scheduled for the first week of April.
Fitch will re-assess the medium term prospects for Ireland’s public finances in light of the deterioration in revenue prospects, forthcoming policy announcements and worsening economic conditions, which could raise the potential call on government funds to support the Irish banks. A Rating Watch Negative is typically resolved within three to six months.”

As a reminder, there are 2 stages in the process of changing ratings with S&P and Fitch (Moody’s is a bit different).
“Rating Watch Negative”
This means action imminent in days (max 4 weeks), and is typically almost certain.
“Negative Outlook”
This means action possible within months (sometime years for sovereigns).
(Ireland is still AAA/Aaa neg outlook with S&P, Moody’s)
The worst damage to spreads is done with the Outlooks… but if the day wants it, any statement is as good an excuse as any to sell risk…
Irish – Bund 2013 and 2018 back to near their highs in terms of yield spread, at 262bp and 284bp respectively.

SSISI Meeting, 20th January 2009, 6 pm at RIA

The next meeting of The Statistical & Social Inquiry Society of Ireland will take place on Tuesday, 20th January 2009, starting at 6 pm [SHARP], at the Royal Irish Academy, 19 Dawson Street, Dublin 2. The President, Dr Donal de Buitleir, will be in the chair when Mr Michael Moloney and Dr Shane Whelan (UCD) will present a paper titled Pension Insecurity in Ireland. The text of the paper is available at, and an abstract is set out below:

The annual amount of the state subsidy to occupational and private pensions in Ireland is double that previously believed and is of the same order as the total annual payments under the state flat-rate contributory and non-contributory pension schemes. We ask: does the state get value-for-money from these subsidies? To answer the question we introduce the fair value approach to value pension entitlements. The current regulatory regime is shown to be very weak, with the security of pension entitlements of those in employment below that of investment grade debt (so the pension promise if tradeable would have junk status). We suggest and analyse measures to improve members’ security and recommend that the fair value of pension entitlements be made a debt on the sponsoring employer and that there should be regular disclosure to members of the level of security backing their pension entitlement. The former only gives a minor increase in security in an Irish context but the latter incentivises members to make other provision for their retirement. We conclude by suggesting that the state has a larger role to play in pension provision in Ireland in the 21st century than it played in the last century.

CSO release: Institutional Sector Accounts: Financial 2001 – 2007 (Revised)

The Central Statistics Office, Financial Accounts Division, National Accounts has released “Institutional Sector Accounts: Financial 2001 – 2007 (Revised)”.

An e-copy of the release is available on the CSO Website.

An Excel version of the tables from the release is also available on the CSO Website.