RATINGS AGENCY RESPONSE:GLOBAL RATINGS agency Fitch has reaffirmed its triple-A rating for State debt in the wake of the Government's announcement of its guarantee for Irish banks.
The agency affirmed Ireland's long-term foreign and local currency issuer default ratings as "AAA" with a "stable outlook".
The rating is a measure of the agency's view of the ability of Ireland to meet its financial commitments on a timely basis. AAA is the highest possible rating.
Some observers had questioned whether the Government's huge guarantee for Irish banks would have the effect of downgrading Ireland's credit rating.
Commenting on the Government's two-year guarantee on the deposits and debt liabilities of six domestic banks, the agency said: "This proactive measure should help buttress confidence in the Irish financial system and limit the risks of a deeper-and-more-prolonged-than-necessary recession at a time of unusual stress in global banking markets.
"While the amount of liabilities covered by the guarantee is more than double Irish gross domestic product [GDP], the Government will receive fee income to help protect taxpayers against any potential costs relating to possible calls on the guarantee."
It added: "Moreover, Ireland's low Government debt ratio - at 25.4 per cent of GDP at end-2007 compared to an 'AAA' median of 44.4 per cent - gives the Government significant balance-sheet headroom to absorb fiscal costs pertaining to the guarantees, should any materialise, enhancing the credibility of the measure."
Another global ratings agency, Moodys, said last night that it viewed the guarantee as "being potentially helpful as it should improve the ability of the six institutions to raise funding in the capital markets at a time when many financial institutions are suffering from a lack of market confidence".
