DUBLIN, July 13 (Xinhua) -- The price of Irish government bonds slumped to an euro-era record low on Wednesday after credit rating agency Moody's downgraded Irish debt to "junk" status Tuesday night.
The yield on Irish government 10-year bonds rocketed to an all-time high of 13.7 percent on the London markets. The interest on eight-year bonds also rose to a record of 14.4 percent.
These bonds are seen as the best indicator as to whether Ireland would be able to fund itself on the international markets.
On Tuesday evening, Moody's downgraded Irish bonds to from level Baa3 to Baa1, leaving them below what is considered investment grade.
Justifying its decision, Moody's said Ireland was likely to follow Greece in asking for a second bailout.
The downgrading has been expected to lead to a large sell-off of Irish bonds by investors who would not hold bonds that are considered below investment grade.
Last week, Moody's unexpected downgrading of Portugal's bonds to "junk" status resulted in criticism from the European Union (EU) of the role of private rating agencies. On Tuesday, the EU announced that it would introduce "stiff measures" to curb the power of the agencies.
The downgrading of Irish bonds too has been reacted angrily by the EU commission.
"Yesterday's decision by Moody's to downgrade Ireland's credit rating is incomprehensible," spokeswoman for Commission President Manuel Barrosso, Pia Ahrenkilde Hansen said at a press conference.
"Its timing as the second quarterly review mission is preparing to announce it's findings is, to say the least, questionable," Hansen continued.
Meanwhile, Hansen praised Irish government for its "determination and decisiveness" in its implementation of the economic adjustment program.
Irish Prime Minister Enda Kenny also dismissed the downgrading in addressing parliament on Wednesday, saying that "Moody's problem is not with Ireland, Ireland's problem is with Europe."
"If there is going to be an EU meeting on Friday it has got to be one that will grasp this nettle and set out Europe's response to the contagion which is clearly causing anxiety and concern," Kenny added.
Germany, Europe's power house, also showed confidence in Irish economic outlook.
German government was optimistic about Irish government as it was making good progress in implementing the tough austerity measures, said Sabine Heimbach, a spokeswoman of German government in a regular press briefing Wendesday.
Italian and Spanish borrowing costs also hit a 14-year high on Tuesday and the EU is planning an emergency summit on Friday in an attempt to deal with the ongoing Greek crisis.