WHY WAS IRELAND THE ONLY SOVEREIGN AMONG THE SO-CALLED "PERIPHERY" NOT
DOWNGRADED?
We have not adjusted our political score backing the rating on Ireland. This reflects our view that the Irish government's response to the significant deterioration in its public finances and the recent crisis in the Irish financial sector has been proactive and substantive. This offsets our view that the effectiveness, stability, and predictability of European policymaking as a whole remains insufficient in addressing the deepening financial crisis in the eurozone. ... All other things being equal, we view the government's fiscal consolidation plan as sufficient to achieve a general government deficit of about 3% of GDP in 2015. In our view, there is currently a strong political consensus behind the fiscal consolidation program and policy implementation so far has been extremely strong.
In our view, Ireland has the most flexible and open economy among the "periphery" sovereigns. We believe that Ireland's economic adjustment process is further advanced than in the other sovereigns currently experiencing market pressures. This is illustrated by the 25% depreciation in the trade-weighted exchange rate since May 2008 and Irish exports growth contributed positively to the muted Irish economic recovery in 2011. However, in our view this also leaves the Irish economy and, ultimately, the Irish government's fiscal consolidation program susceptible to worsening external economic conditions, which is reflected in our negative outlook on the rating.
Poster from Wikipedia.
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