Moody's Investors Service has this morning downgraded Ireland's government bond ratings by two notches to Baa3 from Baa1 - one level above junk status.
The rating agency said the outlook remains negative.
Moody's said the downgrade, which now puts its Irish rating two notches below both Fitch and Standard and Poor's, was due to the expected decline of the Government's financial strength.
The agency is also concerned about the country's weaker economic growth prospects and uncertainty around solvency tests required by the European Stabilisation Mechanism (ESM).
It said Ireland may need to take further austerity measures to meet its fiscal goals and that its financial position may suffer as a result of rises in European Central Bank interest rates.
'Should the intended fiscal consolidation goals not be met, a further rating downgrade would likely follow. Moreover, a further deterioration in the country's economic outlook would also exert downward pressure on the rating,' Moody's said.
It added that upward pressure could also develop on the rating.
Moody's last downgraded its rating on the county in December, when it cut it by five notches.
Yesterday, another credit rating agency, Fitch, left its assessment of Ireland's creditworthiness unchanged after a review of the implications for the economy of last month's stress tests on the banks.
Earlier this month, Fitch said it had placed Ireland's current BBB+ debt rating on what it calls 'credit watch negative', meaning a downgrade was likely. But it decided yesterday against a downgrade.
Fitch today also left its assessment of the debt of AIB, Bank of Ireland, EBS and IL&P unchanged after a review.
