Cyprus said on Wednesday it expected talks to start with lenders on badly needed aid next week, as ratings agency Standard & Poor’s pushed it deeper into junk territory, implying domestic political expediency lay behind a delay in clinching a deal.
One of the smallest nations in the euro zone, Cyprus sought European Union (EU) and International Monetary Fund (IMF) aid in June after its two largest banks suffered huge losses due to a write-down of Greek debt.
A conclusion with lenders on aid has been plagued by delays as the island’s government attempted to get the public onside with an austerity package pending since July.
“I am sure we will have a positive conclusion to our request for aid,” Cypriot Finance Minister Vassos Shiarly told reporters.
Standard & Poor’s, which downgraded Cyprus three notches to “B” from “BB” with a negative outlook, said electoral considerations – a presidential election is due in February 2013 – contributed to “policy inertia”.
Meanwhile, it said, the state – shut out of international capital markets since mid 2011 – was relying heavily on distressed banks it was obliged to recapitalise, in the absence of direct European Stability Mechanism support for Cypriot banks.
Via – CNBC
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