S&P downgrades Irish credit rating amid row over banking support

Ireland's financial headache worsened yesterday after its long-term sovereign credit rating was cut one notch by Standard & Poor's amid fears over the growing cost of propping up its troubled banking sector.

The downgraded sent shivers through the financial markets, which were further spooked by data from the United States showing single-family home sales fell in July to set their slowest pace on record.

In London, the gloomy economic news took its toll on the FTSE-100 index, which was down 46.55 points cent at 5,109.4.

Markets want Ireland to put a final price on purging its banks of a decade-long property binge but the head of Ireland's debt management agency said that was impossible before the year-end when the state-run "bad bank" will have largely completed its purchase of their commercial property loans.

Agency head John Corrigan said: "It's a bit like waking up the patient in the middle of an operation to tell him he's not feeling well. We know the situation is pretty painful but we have to get to the end of the operation, which will be in December."

S&P hiked its estimate of the cost of recapitalising the banks to €45-50 billion (37-41bn), a figure dismissed by the debt agency in unusual criticism.