Rating firm Moody’s said Friday it would review Cyprus for a possible downgrade, citing dragging bailout talks with international lenders on an aid package. Just five weeks after its last ratings cut, Moody’s said the review on Cyprus’s B3 government bond rating was due to rising liquidity risks for the eurozone country, closely linked to debt-crippled Greece. “The slow pace of negotiations with the Troika and the resulting uncertainty regarding the likelihood and timing of a support package which raises liquidity risks” was a key trigger for the review, Moody’s said in a statement. The second factor was signs that Cyprus’s budget deficit “will be significantly larger than expected.” “The key difference between the drivers underlying today’s rating action and Moody’s previous actions on Cyprus is the increase in the country’s liquidity risk in a short period of time,” it said. Moody’s chopped its grade for Cyprus’s debt by three notches on October 8 to B3, citing the impact of the meltdown in the country’s banks following Greece’s financial crisis.
