EU attacks Ireland debt downgrade as 'incomprehensible'

Agence France-Presse

Posted at Jul 13 2011 07:22 PM | Updated as of Jul 14 2011 03:22 AM

BRUSSELS - The European Commission on Wednesday criticized a decision by Moody's Investors Service to downgrade Ireland's debt to junk status as "incomprehensible" and its timing "questionable."

"Yesterday's decision by Moody's to downgrade Ireland's credit rating is incomprehensible," European Commission spokeswoman Pia Ahrenkilde Hansen told a news briefing.

"Its timing as the second quarterly review mission is preparing to announce its findings is to say the least questionable," she added.

Experts from the European Commission, European Central Bank and IMF prepared to present on Thursday their second review of Dublin's implementation of an EU-IMF bailout agreement worth 85 billion euros.

"The Irish government has shown determination and decisiveness in its implementation of the economic adjustment program," Ahrenkilde Hansen said.

"Ireland's banks are being recapitalized and its financial system, more broadly, is being repaired," she said.

Exports are growing strongly and the country is regaining competitiveness, she added.

"There is, of course, much more work that lies ahead and clearly there can be no room for complacency, but Ireland is now on the right track," the spokeswoman said.

Ireland's borrowing costs hit the highest levels since Dublin joined the eurozone on Wednesday, one day after Moody's relegated its debt to junk status and warned it could need a second bailout in late 2013.

The commission had already lashed out at Moody's last week when it downgraded Portugal's debt to junk status and warned Lisbon could also need a new bailout.

The EU's executive arm has been on a warpath with the world's three leading credit ratings agencies, questioning the timing of their debt downgrades, which influence prices and interest rates in the sovereign bond market.