IRELAND HAS HAD its credit rating cut three levels as a result of the rising cost of propping up our banking system.

Fitch Ratings have released a statement in London cutting Ireland’s rating by three levels from A+ to BBB+. They were carrying the news as the main feature on their website home page this morning. The downgrade leaves us just two levels above Greece. The ratings agency said in a statement:

The downgrade reflects the additional fiscal costs of restructuring and supporting the banking system… The scale and pace of the deterioration of public finances, continuing contingent fiscal and macro-financial risks emanating from the banking sector, combined with the highly uncertain economic outlook and loss of market access, means that Ireland’s sovereign credit profile is no longer consistent with a high investment grade rating.

Fitch says that much of Ireland’s €17.5bn contribution to the €85bn bailout for Ireland agreed with the EU and IMF will be used to “fund further capital injections into the banks” and support restructuring.

Ten-year government bonds declined after the announcement from Fitch this morning, Bloomberg has reported. The euro also fell to a session low against the dollar to $1.3208 to the euro after the rating change, says Reuters.

Fitch declared that the outlook for the country was “highly uncertain” over “the medium-term” but that in the long-term it was “stable”. However, The Wall Street Journal noted in its ‘MarketBeat’ blog that the word stable “must have a certain elasticity to its meaning”.

Last Friday, credit ratings agency Moodys were reported to be considering downgrading the six ‘AAA’ rated Irish bonds which are backed by large numbers of residential mortgages as a response to the number of home loan defaults here.

On November 24, Standard & Poor’s downgraded Ireland’s short-term and long-term ratings to A-1 and AA- respectively. Three days later, S&P downgraded Anglo Irish Bank’s credit rating to ‘below investment grade’, or junk, as it is referred to in the markets.