Cyprus warned of Fitch downgrade

FITCH is the third ratings agency to place Cyprus on review.  Last week Moody’s warned the Island’s Aa3 rating could be adjusted downward, while Standard & Poors cut Cyprus’ sovereign rating last November by one notch.

In its statement, Fitch said that it did not expect Cyprus’ AA minus rating to be downgraded by more than one notch. The rating review is expected to be completed during April and will focus on the fiscal risks facing Cyprus, including state pension schemes and the “economic, financial and banking relationships” between Cyprus and Greece.

Finance Minister Charilaos Stavrakis said the 2011 budget would cap the public debt at its present level of 61 percent of GDP.

But critics say the austerity package does not go far enough to deal effectively with a root cause of the fiscal problem – the bloated public sector.

With approximately 52,500 government employees in a country of 800,000, the state wage bill represents some 30 percent of all government spending.

Stavrakis has vowed to cut about 1,000 government jobs over three years and to open talks with the powerful government employees’ trade union on restructuring the government workers’ pension fund.


  1. ha ha ha…

    “Vowed to cut 1000 jobs over 3yrs”

    The more they talk, the more stupid they sound.

    Just like in 1960 – 1973 Squabble, Fight, Bicker.

    Of course, no need to fight now as they all have plenty of cash in the bank.

    As a Cypriot friend of mine said 2yrs ago..”If you have £500k in the bank, we can ride out any storm”

    He works in the real estate business !!!

  2. It is not the banking relationships with Greece, or pensions that is liable to cause the greatest problems for Cypriot banks. It is the amount of toxic developer loans that the Cypriot banks are exposed to. This has hardly been mentioned.

    The recent court case going against Conor O’Dwyer will only make this gigantic problem worse.

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