IRELAND’S NATIONAL DEBT might be becoming more expensive as a direct result of the decision by ratings agency Standard & Poor’s – but at least we can console ourselves in fact that the Financial Times has been amused by the whole thing.

Writing on the paper’s Alphaville blog this morning, Neil Hume seems to take great delight in the “punch-up” (in his words) between “a downgraded sovereign and a rating agency”.

Reporting that Ireland had “come out swinging” after the S&P move to downgrade Ireland’s sovereign rating from AA to AA-, Hume quotes a rep from the National Treasury Management Agency in a piece from Reuters.

The emphasis is that of the FT:

In a strongly worded statement, the National Treasury Management Agency said it disagreed with S&P’s view that Ireland faced substantially higher costs to bail out its ailing banking sector.

“In terms of the specific analysis by S&P, this is largely predicated upon an extreme estimate of bank recapitalization costs of up to 50 billion euros,” the NTMA said.

“We believe this approach is flawed.”

It also points out that the ‘spread’ – the percentage difference in interest offered – in German and Irish government bonds has now reached a record 3.29%, while in August 2007 Irish borrowing was cheaper than that of Germany.

“Either way,” Hume concludes, “its [sic] provided some entertainment on a quiet summer trading day.”

The New York Times’ much-respected economics blogger, Paul Krugman, has offered solace for worried Irish investors by suggesting that ratings agencies are not the be-all and end-all, however.

Writing on his blog, Krugman offers a brief reminder that Moody’s and S&P – the two agencies that have downgraded Ireland’s ratings in the past weeks – gave Japanese debt a similar treatment in 2002.

Although the moves ranked Japanese debt as a riskier investment than that of Bostwana and Estonia, Japan can still borrow with less than 1% interest a full eight years later.