Page last updated at 11:21 GMT, Monday, 8 June 2009 12:21 UK

S&P cuts Irish debt rating again

House construction - generic
The former "Celtic Tiger" has seen sharp falls in its housing market

The Irish Republic's sovereign debt rating has been cut for the second time this year.

Standard & Poor's (S&P) downgraded the rating on its government debt by one notch to AA, from AA+.

In March, the Irish Republic lost the top AAA rating as its public finances deteriorated amid a deep recession.

"The fiscal costs to the government of supporting the Irish banking system will be significantly higher than what we had expected," S&P said.

The country revealed a new emergency budget in April that included a large rise in taxes and a cut in spending to deal with the country's budget deficit.

Negative outlook

It has pumped 7bn euros ($9.7bn; £6.1bn) into its two biggest banks, Allied Irish Banks and Bank of Ireland.

The ratings agency Moody's slashed the debt ratings on all of the banks in the Irish Republic following the budget.

Once known as the Celtic Tiger due to the strong growth it enjoyed, the Irish Republic has experienced a sharp downturn and became the first eurozone country to fall into recession in 2008.

Its budget deficit is expected to reach 9.5% of GDP in 2009, the highest in the EU and far above the EU rules of 3%.

S&P's outlook on the Irish debt remained "negative", meaning that further downgrades are possible.

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