It may have seemed like the financial crisis is Europe had stabilized. Greece has been somewhat quiet. Portugal hasn’t quite boiled over the way some thought it would. But now all eyes are back on Ireland and they aren’t smiling. The government announced today that it would need to pump additional cash into its struggling banking system to an extent that its budget deficit could stretch to a third of its entire economy. No other country in the eurozone has a deficit that bad.
It all started with the Central Bank of Ireland announcing Thursday that the state-owned Anglo Irish Bank would need close to a EUR30 billion infusion. Although the government and the European Union have ruled out a Greece-like bailout, that certainly must be on the mind of some investors.
Ireland wasn’t the only European country in the news for its fiscal problems Thursday. Spain saw its credit rating downgraded one notch to Aa1 by Moody’s Investors Service Inc. The ratings agency cited the country’s weak growth prospects.