S&P cuts ratings on Irish banks; Anglo deemed junk
DUBLIN – The Standard & Poor's credit ratings agency downgrades Ireland's banks as speculation mounts that an EU-IMF bailout of Ireland could require senior bondholders to help cover the losses.
New York-based S&P said in a statement Friday it was lowering Anglo Irish Bank six notches to a junk-bond B grade. It also cut the ratings on Bank of Ireland and Allied Irish Banks one notch each to BBB+ and BBB, respectively.
The agency says bonds issued by Anglo are particularly at risk of being discounted as part of the EU-IMF rescue mission to Dublin. It says Ireland "may be forced to reconsider its current supportive stance toward Anglo's unguaranteed debt."
Junior bondholders at Anglo already have been forced to accept losses of 80 percent to 95 percent on their loans.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
DUBLIN (AP) — An Irish nationalist who has vowed to vote against Ireland's austerity plans has won a seat in parliament, election returns showed Friday, cutting Prime Minister Brian Cowen's majority to just two seats.
Deputy Prime Minister Mary Coughlan conceded victory to Sinn Fein candidate Pearse Doherty, who successfully sued the government over its 17-month refusal to permit an election to fill the empty seat in Donegal, northwest Ireland. Cowen had long feared that an opposition candidate would win the seat.
Doherty said his dominant performance in a six-candidate field showed that people want to elect a new government that will force foreign banks, not Irish taxpayers, to bear the cost of Ireland's enormous financial crisis.
"(Voters) are telling Brian Cowen to get out of office. It's not clear that this budget will pass. It is completely unfair and unjust to attack the weakest and most vulnerable in this society," Doherty said. "The government should suspend the budget, call a general election, and let the people have their say."
Cowen is unveiling an emergency 2011 budget on Dec. 7. He and European officials say that budget must be passed to clear the way for an euro85 billion ($113 billion) loan for Ireland from the European Union and the International Monetary Fund.
Doherty's win leaves Cowen with 82 votes in the Dail Eireann, the parliament, to the opposition's 80.
Full but unofficial results tabulated by party activists found Doherty received 39.7 percent of votes, while the candidate from Cowen's Fianna Fail party finished a distant second with 21.2 percent. Official results were being announced later Friday.
Cowen has already offered to hold an early national election in February or March — but only after all budget measures have been approved in parliament.
The 2011 budget seeks to slash euro4.5 billion ($6 billion) from spending and add euro1.5 billion ($2 billion) in new taxes as part of a four-year plan to reduce Ireland's annual deficits to 3 percent of gross domestic product in 2014.
Ireland's 2010 deficit is running at 32 percent of GDP, the highest in Europe since World War II. The country's severe financial problems are rooted in its enormous bailout of Irish banks who gorged themselves on overpriced real estate.
Cowen published a four-year plan this week that proposes cuts to welfare payments, pensions and the minimum wage and raises virtually all forms of tax — except the 12.5 percent rate that Ireland applies to business profits.
That rate is credited with wooing nearly 1,000 high-tech multinationals seeking an EU base to Ireland. Many European nations preparing to contribute to Ireland's bailout say the Irish should raise that rate to nearer the EU average above 25 percent.