Moody's puts Cyprus in “high-risk category”

PanARMENIAN.Net - Moody's ratings agency has lowered its ratings on Cyprus's government debt to junk status because of the impact of the crisis in neighbouring Greece on its banking system, RTE reported.

Moody's cut the country's rating on long-term bonds to Ba1 from Baa3 and on short-term debt to "Not Prime" from "Prime-3" with a negative outlook. The term negative outlook means that the agency does not rule out lowering the notations again in the medium term.

Cyprus had been at risk of this downgrade by Moody's since the agency put it under negative watch at the beginning of November. The decision makes Moody's the second rating agency to classify debt issued by Cyprus in the high-risk category.

However, Moody's said it had limited its action to one notch "in acknowledgement of the positive developments in Cyprus since Moody's placed the country's rating on review for downgrade in November 2011."

''In particular, Moody's notes that the Cypriot government has now passed a large-scale fiscal consolidation programme, which contains a greater number of structural changes to public-sector expenditure than had been anticipated. These measures are likely to enable the country to achieve a deficit reduction of around three percentage points of GDP in 2012,'' it said.