Moody’s cuts Cyprus’ credit grade by 2 notches to Baa3 over banks’ exposure to Greece

NICOSIA, Cyprus – International ratings agency Moody’s cut Cyprus’ credit grade by two notches to Baa3, or just above junk status, because of the high likelihood that its heavily Greece-exposed banks will need state support.

Moody’s also cites 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 in a statement Friday to the island’s difficulties in approving and implementing budgetary and structural reforms needed to fix the government’s rising debt and to shore up the long-term sustainability of its public finances.