On paper, Moody's decision to downgrade Ireland's credit rating is a blow for the Irish Taoiseach, who had just returned from the US where he was trying to drum up business for the battered economy.

But the story virtually disappeared from the news agenda within hours – overtaken by yet another development in Ireland's banking horrors. Austerity measures after the banking crisis have brought huge cuts in the public and private sectors, with unemployment now at a record 450,000. Negative equity is a huge issue for home owners and small businesses including factories, pubs and hotels, are being squeezed by a continuing credit squeeze and the general downturn in the economy.

So when Moody's announced its rating downgrade, the public reaction could be summed up as: so what, we're broke anyway.

"The main story here is our problems are huge, but we are doing the right things to fix them. What Ireland has done better than any other country is that it was the first out of the traps to try and fix things.

"Darling and Brown went in the completely opposite way. They thought they could spend their way out of the recession," said Simon Carswell, financial journalist and author of Something Rotten: Irish Banking Scandals.

Mark Fielding, chief executive of Irish Small and Medium Enterprises Association, a regular critic of the government, said: "While it's not nice to have it on your CV as a country, the reality is people can see what changes are being made and that the government is going in the right direction."

Their comments would be small comfort for the Taoiseach, Brian Cowen, who launched an attack on the media for what he was said was constant negative coverage of the economy.

Cowen faces a critical challenge to his efforts to get the country back on its feet. His decision to set up a "toxic bank" to handle all Celtic Tiger property loans, could be overturned in court by a property developer who argues the National Asset Management Asset Agency (Nama) is in breach of his human rights.

The case is being brought by Paddy McKillen, who has significant investments in London including a stake in the Maybourne hotel group – the company which owns the five-star Claridge's, Connaught and Berkeley hotels. He claims all his loans are "fully performing" and the transfer of loans into NAMA will have a "drastic and significantly detrimental" impact on his business reputation.

The state told the court that Paddy McKillen's case "was a very real threat to the vital work of Nama" in fostering confidence in the Irish economy on the international markets.

Mr Justice Paddy Kelly granted the state's application to have the case fast-tracked for a full hearing which will take place on 12 October. Nama has bought its second batch of loans paying less than 30 cents in the euro on loans from one of the four banks involved, exposing the true scale of the the banking crisis yet again.