MOODY’S CREDIT RATING Agency has warned that it might downgrade Ireland’ credit rating again, citing the cost of bailing out the banks, weak economic growth and rising borrowing costs, reports The Wall Street Journal.

The warning comes nearly a week after the Central Bank announced that the cost of bailing out Ireland’s failed banking institutions could reach €50bn – pushing the country’s budget deficit up to 32 per cent of gross domestic product this year.

Ireland will now have the highest budget deficit of any EU country since the euro was introduced in 1999.

If Moody’s cut Ireland’s debt rating, it could make it even harder for the state to meet debt repayments – and this would increase the possibility of Ireland having to seek assistance from the EU’s European Financial Stability Fund.

However, Moody’s has said that it is still possible that Ireland will bring its borrowing under control. The WSJ quotes Moody’s lead sovereign analyst for Ireland, Dietmar Hornung as saying:

Even with elevated yields it is possible to stabilize the debt, but it would require additional [budgetary] efforts and meaningful growth.

A one-notch downgrade for Ireland would bring the country to a double-A-minus rating, which would be in line with Standard & Poor’s rating.

A Moody’s review can take up to three months to complete.