Moody Lowers Cyprus’s Credit Grade

Posted November 4th, 2011 at 5:25 pm (UTC-5)
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International ratings agency Moody's has lowered Cyprus' credit grade by two notches, placing it lowest in the investment category.

In a statement Friday, the agency said Cyprus was downgraded to BAA3 from BAA1, because its banking system is likely to need a government bailout due to its exposure to Greek debt.

Moody's also cited the Cypriot government's inability to borrow from international markets, which raises the possibility that authorities will need to seek emergency funding from official sources.

The agency also pointed to the island's difficulties in approving and implementing budgetary and structural reforms needed to ensure the sustainability of public finances.

The Mediterranean island nation is divided into Greek and Turkish communities and the majority of the population are ethnic Greeks.