Moody's cuts Cyprus

Moody's Investors Service said it downgraded Cyprus' government bond ratings to Baa1 from A2.

The outlook is negative.

The rating agency also downgraded Cyprus's short-term rating to P-2 from P-1. The rating action concludes the review for possible downgrade initiated on May 16.

The ratings consider ongoing concerns about Cyprus's fiscal position, which are amplified by the fiscal and economic consequences of the destruction of the Vasilikos power plant on July 11; the increasingly fractious domestic political climate; and the material risk that at least some Cypriot banks will require state support over the medium term as a result of their exposure to Greece, the agency said.

The negative outlook reflects the view that, in the current environment, the risks to the Baa1 rating are skewed to the downside, the agency added.

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