These are financially straitened times. We are seemingly pummelled each day with reports of our financial fragility and there seems to be a consequent need for stringent fiscal policy to assure international investors of our ‘bona fides’. In such a context, it is interesting to explore the geography of national and regional credit ratings. Despite its flawed analysis of the risk associated with sub-prime assets that contributed to the near collapse of the global financial system, as one of the leading financial ratings agencies Standard & Poor’s remains an important force in determining Irish fiscal policy. The ratings purport to indicate the risk associated with lending to a country. There are 16 possible classifications ranging from AAA+, indicating an extremely strong capacity to repay debts, to SD/D, indicating that a partial or full default is likely.
Ben Schott recently compiled a table comparing the ratings of a range of countries and each of the 50 states that make up the USA. A comparative analysis shows that Ireland has gone from an AAA (best quality borrowers) to an AA (very strong capacity to repay debts, but with higher risk than AAA) classification between January 2008 and January 2010. Interestingly, with the exception of Ireland, Greece, Spain and Portugal, the ‘old’ EU countries have maintained their ratings throughout this period. Greece is currently one rating classification away from Iceland. Many of the new EU member states, although by no means all of them, have witnessed a downgrading of their ratings.
It appears that Mary Harney may have been inadvertently right; we are indeed closer to Boston (Massachusetts) with its AA standing than Berlin (Germany) with its AAA rating. Going by these rating classifications, however, we are, at this stage, a far cry from being the next Iceland, or indeed, Greece.
David Meredith
Ireland after NAMA 
February 11, 2010 at 12:32 pm
S&P etc are mainly American. America is probably the worst affected by the credit destruction as it has been active there since the dot.com in 1999. The sub-prime, altA ARM etc were all caused by the decision to lower interest rates. The rating agencies will continue to over rate American sovereign debt. They have been criminally irresponsible in rating trash as AAA. They are helpless in the palm of the hand of TPTB. The $ US must hold out for as long as possible while TPTB $ US is converted into gold etc.
This will end. But not well and not soon. 30 years of an economy based on credit, which had to get ever easier to maintain flow of funds and profit, is now a distant memory. The money machine is broken and all that paper wealth, especially fiat money, must decline and decline again. Once the bubble has been deflated, we will see what is real and productive and what is not. The FIRE sector has to shrink to maybe 20% of peak. Employment, profit, dividends will all be affected. What that funded will decline even more. Bargains will abound, but the problem in deflation is that buying too soon means watching value shrink. Sell now to survive longer as selling later will lose more. Find somewhere with cheap energy and preferably warm. Global warming is also a lie! Cap and trade? A substitute for banking, so TPTB can keep their hand in and be ready once the slaves have decided that they have saved enough. Then they will come out again with offers of cheap credit. First one in wins most!
November 13, 2010 at 3:03 pm
The newspapers and TV/radio media have been treasonous in their reporting of the solely negative while marginalising the positives, for example our industrial growth being twice the EU average this year.
No news is good news. All news must be presented in a way that the economy and its consumers are depressed and that the markets only see this.
November 14, 2010 at 3:43 am
Ireland has a massive maritime economic zone.
Based upon that and its land, it should be the wealthiest country in Eruope.
Why not?
November 14, 2010 at 9:49 pm
Yes, probably so. But try and get the clinically depressed and fatalistically negative Irish media (and 90% of the population) to agree with that without slagging the idea.