Ratings agency Standard & Poor's would not automatically downgrade Ireland if Greece was to restructure its sovereign debt, the agency's lead analyst for Ireland told Reuters today.

Rival agency Moody's yesterday warned of a chain reaction of severe consequences for the euro zone if Greece was allowed to default next month, saying Portugal and Ireland could be downgraded from investment-grade to junk.

'We would have to assess the situation as and when that occurred. In terms of the ratings, we focus on the fundamentals, the medium to long-term macro-economic growth prospects, the fiscal position,' S&P analyst Trevor Cullinan said.

Standard & Poor's last month cut Ireland's debt rating by one notch to BBB+ after stress tests revealed another €24 billion black hole in the country's four main banks.

It praised the efforts to draw a line under the crisis by recapitalising the banks, however, and said Ireland had better growth prospects than fellow aid recipients Portugal and Greece.

Mr Cullinan said nothing had changed fundamentally since that downgrade, and that S&P was still forecasting growth of around 2.4% in 2013-2015.

'The market is to some extent overshooting and the Government are doing everything within their power in terms of meeting the fiscal consolidation targets to bring the situation under their own control,' he said.

Ireland must maintain growth to avoid a downgrade and an acceleration of austerity measures or an increase in the corporate tax rate could threaten this, he said.

The Government is currently implementing a €15 billion fiscal adjustment in the four years to 2013. 'Potentially any consolidation over and above that would have an even more negative impact on growth prospects,' the S&P analyst said.

'At the moment we are comfortable with the Government plans as they stand,' he added.

Ireland's 12.5% corporate tax rate, a bone of contention with several other EU states, is key to the country's recovery strategy, he said.

'Any substantial change in those arrangements to the detriment of the multinationals would potentially be negative for Ireland's economic growth prospects and potentially negative for the rating,' he said.

S&P also said that Ireland has until 2013 to convince investors it is different to Greece. 'By 2013 maybe at that time the market will have been able to distinguish between these two countries. At Standard & Poor's we certainly do,' Mr Cullinan said today.

Ireland is expected to return to the debt markets in 2013, although the Government has said it expects to tap the markets in 2012. If the country doesn't convince markets of its financial soundness it may have trouble finding buyers in the market.

Mr Cullinan said Ireland may experience further quarters of negative growth, but the bottom of the downturn had been reached.

'Although there may be further quarters of negative growth we have come to the bottom of the downturn. Over the medium-term the growth prospects will improve,' he said.

The Government has been trying to secure medium-term funding for its banks from the European Central Bank to replace emergency credit, but this is not a major concern for S&P.

Irish banks owed the ECB €106 billion in short-term liquidity assistance by the end of April. 'We would expect the ECB to continue to be supportive to the Irish banking system so the format of that support is not a key rating factor as long as the support remains in place,' he said.

While Ireland's rating is not directly dependent on what Greece does, broader market sentiment remains a threat.

'Ireland is expected to be accessing the capital markets from 2013 so any deterioration or continued uncertainty or volatility in the capital markets would make it potentially more difficult or at least more expensive,' Cullinan said.

Ireland should not move on corporation tax - OECD

Ireland should not raise its low rate of corporate tax, a senior OECD official said today at a conference in Dublin.

'We don't think it should be increased because capital is mobile and can move to another country,' Patrick Lenain told a fiscal conference in Dublin as the OECD released its twice-yearly economic outlook.

The OECD offical also said that Irish house prices will stop falling in 2012. 'We expect the housing market will stop contracting in 2012,' Mr Lenain said.

He said the capital needs of the Irish banks, as revealed by stress tests in March, should be met as soon as possible.

The OECD expects the Irish economy to post zero growth this year. Mr Lenain said the Government's fiscal adjustment efforts were on track.