The credit agency Moody’s just downgraded Ireland’s credit rating, citing weak prospects for economic growth and increasing debt levels. This is sad news for a nation once thought to be a bastion of good fiscal policy.
We’ve seen in Greece what happens when a country’s debt levels rise and credit rating falls: Investors start demanding higher interest rates because they fear that the country may default. That means the country faces higher interest payments, and those higher interest payments mean a worse budget crunch and even high deficits. It’s a vicious cycle that doesn’t end well.
Moody’s warned in March that it would have to consider lowering the United States credit rating if we don’t get our debt under control. We need to take action now so that we don’t follow Greece’s—or now Ireland’s—path.
