Ireland’s sovereign bond rating was cut by one notch to Aa2, depicting weaker growth prospects and the higher reconstruction cost for the country’s weak banking system. However the outlook is said to be stable.
But this fall was declared after a €20bn (£17bn) financing deal for Hungary by the IMF and the European Union during the weekend. But the talks came to a stop when the European Commission showed concern regarding the budget plans of the newly elected Hungarian government.
It implies that the remaining funds amounting to €5.5bn in its €20bn credit line will be inaccessible to Hungary, till the review is completed.
Gary Jenkins of Evolution Securities observed that Moody’s placed Spain’s ratings also on review last month “Nothing on Italy yet, but considering that there is a two-notch differential between Moody’s and S&P it would not be a major surprise if Moody’s didn’t take a look at Italy next,” he added.
European shares fell for the third session in the morning, further lowered by banks, and the euro slipped off from its two-month highs. It bought $1.2925 this morning during the early trading sessions in Europe, down from $1.2947 in New York on Friday night. In London, the FTSE 100 index traded down about 18 points at 5140.74.
Market players are now eagerly waiting for the release of the results of stress tests on 91 Europen banks due for publishing this Friday.