Moody's downgrades all three major Cyprus banks

Moody's rating agency downgraded all three major Cyprus banks on Tuesday, just four days after downgrading the Cyprus's government bonds by two notches to Baa3 from Baa1. Moody's said it downgraded Cyprus second biggest lender, Marfin Popular Bank, by three notches to B2 from Ba2, citing its much wider exposure to the Greek debt comparing with the other two banks. The Bank of Cyprus and the Hellenic bank were both downgraded to Ba2 from Ba1. All three banks were placed on review for a further downgrade. Moody's cited the low ability of the Cyprus government to support its large banking system, which represents 6 times the Gross National Product. Cyprus Finance Minister Kikis Kazamias said on Tuesday that the new downgrade of the banking system was excessively harsh and was causing concern. He said that by the end of the week he will table new austerity measures to consolidate public finances, but he did not go into details. Central Bank Governor Athanasios Orphanides has said that the government may need to raise taxes so as to convince the world that it is reliable enough to overturn the situation and get out of an economic crisis. He criticized authorities for being slow to respond to the crisis. An austerity package freezing cost of living allowance and some other benefits for public servants is still pending before Parliament. The opposition parties, taking a parliamentary majority, have warned that they may not approve next year's state budget if they consider that the government measures do not go far enough to get the island out of its economic woes.