A THIRD credit rating agency has raised doubts about Ireland’s credit worthiness. Moody’s said yesterday it was reviewing the “triple A” credit-rating of a number of countries including Ireland.

Ireland had lost “considerable altitude” amid shrinking public finances but it was too early to say whether Dublin’s ratings would be changed, said Moody’s.

“We are currently reviewing the strength of AAAs, and we will publish a paper soon on ‘how far can a AAA government stretch its balance sheet’,” said Moody’s vice-president and senior analyst, Dietmar Hornung. “In that context, we are monitoring the development in Ireland very closely,” he said.

“It’s pretty obvious that within the triple-A range, Ireland has lost considerable altitude, but it’s too early to conclude that we will go for a change,” he said.

Standard & Poor’s and Fitch, the other two leading credit-rating agencies have already expressed similar concerns about Ireland and other euro zone countries including Spain and Portugal.

Yesterday Standard & Poor’s cut its credit ratings on Greece’s sovereign debt, due to falling economic competitiveness and a rising fiscal deficit worsened by the global crisis.

The news sent bond spreads sharply wider and the euro fell to below $1.31. S&P cut Greece’s sovereign rating, already the lowest in the 16-nation euro zone, to A-/A-2 with a stable outlook from A-/A-1.

Doubts about Ireland’s and other euro zone states’ ability to service their growing debts has pushed up the differential between the interest they must offer and that paid by Germany, the strongest economy in the zone.

The “spread” relative to Germany has soared to its highest since at least 1999. The spread for Irish bonds rose briefly to 1.75 per centage points yesterday, following incorrect reports Ireland might need assistance from the International Monetary Fund. The spread for Greek bonds is 2.47 percentage points above Germany, while the spread between French and German bonds – wiped out a few years ago – has widened to near 60 basis points.

Economic affairs commissioner Joaquín Almunia has said – in an interview published today – the higher borrowing costs some euro zone states such as Ireland face is not a threat to the euro currency.

But he has called for a new debate on a proposal to establish a euro area agency that could issue public debt on behalf of all members of the euro group.

This could reduce the borrowing costs for euro zone states in poor financial health, currently paying record amounts of interest compared to Germany for borrowings.

“This increase in the sovereign spreads within the euro area has drawn attention to some initiatives that have been considered since the beginning of the EMU such as the common issuance of public debt by the whole euro area or by some members of the euro area . . . I think this is an idea that is worth discussing again,” he told the European Voice newspaper in an article published today.

In the face of the current economic crisis, some analysts have questioned whether the increasing spreads between different euro zone states could threaten the single currency’s future.

But Mr Almunia said the higher borrowing costs faced by some euro zone states was a useful instrument to ensure that countries acted to get their public finances in order.– (Additional reporting by Reuters)