Moody's: Spain three notches down, Cyprus two
Baku, June 14 (AZERTAC). Rating agency Moody's has cut its rating on Spanish government debt by three notches from A3 to Baa3. Cyprus’s sovereign debt was lowered by two notches from Ba1 to Ba3.
The agency said Wednesday that Spain’s debt burden would increase once the EU has approved a plan to help the country's banks. It has Spain under further review and could lower its rating even further. Moody’s points out that the Spanish government has "very limited" access to international debt markets and notes the general weakness of the country's economy.
For Cyprus, Moody’s is citing the increased risks of a Greek exit from the eurozone and its generally unstable fiscal position, while Cyprus has close cultural, business and political links with this country. Just like Spain, Cyprus was also put on review for further downgrade. Its weak credit position is jeopardized by limited access to international markets, Moody's said in a statement.
Spain is the eurozone's fourth biggest economy, while Cyprus is the third smallest.
Moody's rating cut, to Ba3 from Ba1, takes into account a new assumption that Cyprus will need to contribute capital support to its banking system in excess of a prior estimate of 5 to 10 percent of gross domestic product.
On Tuesday, Moody's cut the credit ratings on two Cypriot banks and put them on review for possible further downgrade because of the rising risks of a Greek exit from the euro zone. A third bank's rating was held but also put on review for downgrade.
Greece goes to the polls on Sunday, June 17 to vote in parliamentary elections after an inconclusive outcome in May. That previous election raised the possibility that a new government could backtrack from an agreement with European partners for a 130 billion euro bailout package.
Moody’s is currently in a process of a wider review of European banking systems. It has recently cut credit ratings of banks in Italy, Spain, Portugal and the Nordic region. The remaining reviews of other European banking systems are expected to be concluded by the end of June.
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