Moody’s cuts Greek Cyprus by two notches

WASHINGTON - Agence France-Presse

A woman is seen riding her scooter in the empty city center of Greek Nicosia. AFP photo

Moody’s on June 13 cut the credit rating of Greek Cyprus by two notches, citing the nation’s close links to Greece and the rising likelihood that Athens will exit the eurozone.

Moody’s Investors Service downgraded Cyprus’s government bond ratings to Ba3 from Ba1, and placed the ratings on review for further possible downgrade.

“The key driver for today’s rating action is the material increase in the likelihood of a Greek exit from the euro area, and the resulting increase in the likely amount of support that the government may have to extend to Greek Cypriot banks.

“The two-notch downgrade reflects Moody’s assessment that this risk is exacerbated by the fact that the country’s finances are already strained and access to the international markets is still denied.” The US ratings agency said it had put Cyprus’s sovereign bond ratings on review for further downgrade, saying it needs to assess Greek Cyprus’s “substantial downside risks to the banking sector and the sovereign as a result of a Greek euro exit.”

Those risks have the potential to rise in the aftermath of the Greek parliamentary elections at the weekend, Moody’s said. The vote could lead to the country’s exit from the eurozone, which would likely spark deep financial turmoil. On June 12 Moody’s downgraded two Greek Cyprus banks.