Moody's downgrades Ireland's credit rating to one grade above 'junk'

Ireland's credit rating has been downgraded to only one rung above 'junk' status by Moody's Investor Services, while state debt levels in Greece are being viewed with fresh worries. The move comes as a huge blow for Ireland's economy.

According to analysts, it once again highlighted that the troubles, facing the eurozone had not been completely left behind and might resurface.

The Baa1 to Baa3 downgrade, would increase borrowing costs for a country in deep trouble over payment of interest on its debts.

With the downgrade, Ireland is on the last 'investment grade' credit score and on the verge of a 'junk' rating.

Such a rating would discourage investors from buying Irish government bonds, making it even harder for the country to borrow.

Meanwhile, Moody's has warned that Ireland faced weak economic growth prospects from the austerity measures and interest rate hike this month by the European Central Bank.