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Ireland's Credit Rating Drops 3 Levels

Demonstrators protest outside Government Buildings as the budget is announced, in Dublin, 07 Dec 2010

Ireland's credit rating has been cut three levels by a ratings service in the aftermath of the Irish government's acceptance of an international bailout to help solve its debt problems.

Fitch Ratings said Thursday it has dropped Ireland's rating from A+ to BBB+, three levels above non-investment grade. The lower rating means the Irish government will have to pay higher interest rates on money it borrows to finance its operations.

Ireland is faced with Europe's worst post-World War II deficit, amounting to 32 percent of the nation's overall economic production. The government last month accepted a $113 billion bailout from its European counterparts and the International Monetary Fund. Ireland has also embarked on an austerity program, cutting spending on social welfare programs and raising taxes.

Fitch said it cut Ireland's rating because the country's credit profile is "no longer consistent" with a high investment grade rating.

It is second time in two months that Fitch has cut its rating of Ireland. In October, it dropped the country's rating one notch, from AA- to A+.

Despite the new cut in its rating, Fitch's Irish rating is still two levels above that of Greece, the first European nation forced to seek international assistance to solve its debt problem. Greece accepted a $146 billion bailout in May and continues to face high borrowing costs.

European officials say they favor allowing Greece more time to repay its debts, possibly extending the repayment period from 2018 to 2024.

Some information for this report was provided by AP, AFP and Reuters.