Standard & Poor's downgrade of Ireland's public debt on Tuesday maybe based on an extreme view of the outcome of the Irish banking crisis but almost 2 years after the State banking guarantee was issued, there remains uncertainty about the cost and plans for the State-owned Anglo Irish Bank and against the backdrop of a fragile international economic recovery, even the much praised efforts to correct the public finance situation may also trigger market concerns unless plans to correct the public finances are more than generalised aspirations.

John Corrigan, chief executive of the National Treasury Management Agency (NTMA), said on Wednesday that S&P's debt calculations were not in line with the approach of the International Monetary Fund or Eurostat, the European Union's statistics agency. S&P assumed all State capital provided to the Irish banks were debt while Eurostat views the €7bn provided to Bank of Ireland and AIB in 2009 as an investment. Corrigan also said the credit rating agency did not put any value on the property assets of the State's toxic property loans' agency, the National Assets Management Agency (NAMA.)

However, S&P said the Irish Government will recover €16bn from the assets over the first five years. But it does not regard the NAMA assets as very liquid and says it will be difficult and time consuming for NAMA to convert them into cash.  It estimates the total cost of the banking crisis, including NAMA, will be €90bn or 58% of GDP, a figure rejected by the NTMA, which puts the ultimate cost of Anglo Irish Bank at €24bn, whereas S&P put it at €35bn.

The €24bn is based on the former builders' bank being maintained as a going concern even though its brand is junk. This estimate will likely be revised up, despite NTMA's current stance.

In response to the hostile official reaction, Trevor Cullinan, the London-based lead analyst with the agency pointed out that despite the downgrade, Ireland still had a “very strong credit rating, and the capacity of the Government to meet its financial commitments is still very strong”.

S&P additionally commented: “We understand that NAMA has been organised in such a way as to keep it off the Irish government’s balance sheet under Eurostat’s accounting rules. We take a different approach and have treated similar off-balance-sheet arrangements to support national financial systems in other countries as direct obligations of the government.”

Ireland's rating with S&P is now at the lowest level since 1995 and 10-year Irish bonds were trading up 22 basis points on Wednesday, to 344 basis points (3.44%) above the benchmark German bund yield of 2.255%, having reached as high as 347 basis points during the day - -  the highest spread since the euro was launched in 1999.

NTMA plans to auction €600m worth of bonds today.

Ratings agencies can be attacked for being the handmaidens of Wall Street before the crisis and some assessments now are likely to be over-cautious. However, it is ludicrous that there remains so much uncertainty about the State's costs and the fate of Anglo Irish Bank. almost two years after the crisis began. Why did it take so long to discover that bank paperwork supporting big value loans, was of 'shoe-box' sole trader standard? Where again were the auditors? 

Ireland and Denmark were the only countries to guarantee bank debt (funding from bondholders), a move that restricted options for cleaning up the banking mess. However, other countries have responded much more promptly to the crisis.

With uncertainty about the ultimate cost to the State of supporting Anglo Irish Bank and the risk carried by a NAMA due to be one of the world's big property managers, the debate about tens of billions in State support, is parallel with a discredited government scratching around for spending cuts of up to €3bn for 2011.

Besides there is no serious interest on the part of the Government or Opposition in structural reforms of the systems - - with the exceptions of changes underway at the Central Bank - -  which brought Ireland to this sorry pass.

If the international recovery stutters in coming years, this issue of the public finances will again will fuel uncertainty.

In the short-term, there is uncertainty about the extension of the State's bank guarantee, which will expire on Sept 30th. Last week, Central Bank governor, Prof. Patrick Honohan, suggested it should be extended in quarters not years.  

This issue is important as the banks will have to refinance up to €30bn in maturing debt, in coming months.

The messenger is not infallible but we could benefit from taking a serious look in the mirror!

There is really little likelihood of that occurring.

In a move criticized by the Ireland’s debt management agency, Standard & Poor's cut the country’s credit rating. “The problem is really an Irish problem…they took a very conservative view of bad debt…now they have a very bad, bad debt and that’s exactly why their rating is deteriorating,” Ralph Silva from Silva Research Network told CNBC: