Standard & Poor's Cuts Cyprus Rating
Rating agency Standard and Poor's has cut Cyprus' long-term sovereign credit rating from A+ to A with a negative outlook, citing the island's exposure to the Greek banking sector.
However, Cyprus' short-term sovereign credit rating A-1 was affirmed. In comments on the news, Finance Minister Charilaos Stavrakis said that although the banks in Cyprus are exposed to Greek public debt, he is "convinced that the Cypriot banking system is robust and has a solid capital base."
Stavrakis also pointed to positive results from recent stress tests carried out by the European Central Bank on the island's three largest banks. He said that although the rating downgrade was a negative development, the government has covered the borrowing needs from abroad for the next several months, so it will have no effect on the Cypriot taxpayer.
The rating downgrade shows the need for all political parties to take measure for fiscal consolidation, said Stavrakis, calling on all social partners to stop passing the buck and respond to a common effort to get the economy on track.
In May, the ministry of finance's economic measures were rejected by the House of Parliament.
The minister said that rating agencies Fitch and Moody's are expected to review their ratings, and believes that Fitch will reaffirm Cyprus' 2D score.
Meanwhile, analysts said that the ratings cut contributed to a drop in Greek stocks, which fell overall by 1.45 percent yesterday.