Ratings Are Cut on Ireland and its Banks

Fitch Ratings lowered Ireland’s credit grade to the lowest of any of the major rating companies and said there’s a risk of a further reduction.

Ireland was cut to A+ from AA-, reflecting the “exceptional and greater-than-expected cost” of the nation’s bailout of its banking system. Fitch said the rating could be lowered again if the economy stagnates and political support for budgetary consolidation weakens.

The move came a day after Moody's said it may cut Ireland's debt rating again. Fitch now rates the government two notches below Moody's and one notch below Standard & Poor's Corp.

Fitch's move followed Moody's downgrade Wednesday of state-owned Anglo Irish Bank Corp.'s Lower Tier 2 debt to its lowest rating, C. The rating indicates expected default with little prospect of recovery. Moody's also cut Bank of Ireland's dated subordinated debt to Ba1 from A2, while Allied Irish Banks' subordinated debt was downgraded to Ba3 from A2.

The downgrades were significant and reflected concerns that Anglo Irish's problems could hurt the subordinated debt of other banks.

The moves by Fitch Ratings and Moody's Investors Service Inc. come after the Irish government acknowledged that the costs of bailing out the banks—which have suffered huge losses as a result of property loans—will push its budget deficit up to 32% of gross domestic product this year, the highest for any member of the euro zone since the currency was launched in 1999.