The cost of Irish borrowing has begun to climb again after ratings' agency Moody's put Ireland's debt on review for a possible downgrade.
The agency said it took the step due to the cost of fixing the country's banks, the outlook for domestic demand and recent rise in interest rates for Irish debt.
The development comes after three days of improving sentiment towards the country following the Government's publication of the €35bn bailout of Anglo and Nationwide and virtual nationalisation of AIB.
This afternoon, the cost of borrowing for Ireland reached 6.5%, up from 6.3% when the market opened.
While the level of interest is high, it is lower than its peak of 7.9%, reached recently as markets remained nervous ahead of Minister for Finance Brian Lenihan's bank announcement.
Despite Moody's step, the rating agency's analyst Dietmar Hornung said Ireland was better placed to deal with is budgetary crisis than many other eurozone countries.
He told Reuters that the Government had to come up with a ‘credible plan’ to bring the deficit below 3% by 2014.
In a separate report the International Monetary Fund said Ireland's large financial system and the large scale of concentrated exposures to the commercial property sector had a greater impact on its cost of borrowing than other peripheral eurozone states.
It said actions on Anglo ‘coupled with other actions to stabilise the Irish banking system and the fiscal balance sheet are expected to limit the contingent liabilities faced by the Government.’
