国际英语新闻：Standard and Poor's lowers Cyprus' rating

NICOSIA, Nov. 16 (Xinhua) -- Standard and Poor's cut Cyprus' long-term sovereign credit rating on Tuesday from A+ to A with a negative outlook, due to the credit risk of the island state's external assets and domestic loan.

"The downgrade reflects our opinion of increased vulnerabilities from embedded credit risk of the Cypriot financial system's external assets and domestic loan book, and the impact these could ultimately have on public finances," a Standard & Poor 's statement quoted credit analyst Benjamin Young as saying.

According to the international rating agency, during the past decade, the Cypriot financial system's total exposure to Greek customers and securities of the Greek government and corporations has grown to exceed 2.5 times of the nation's GDP.

"Although the system reports high capital levels, the sheer size of Cyprus' financial center poses funding risks in our view," said the statement.

In addition, the relative size of Cyprus' domestic credit, which stands at 280 percent of GDP, is among the highest in Europe. Much of it is collateralized by property assets, which have suffered an overall decline in value in the last two years, the rating agency added.

However, Cyprus' short-term sovereign credit rating A-1 was affirmed by Standard and Poor's.

In response to the negative development, Cypriot Finance Minister Charilaos Stavrakis assured the nation that the downgrading will not have a direct impact on taxpayers since the government had covered its borrowing needs from abroad for the next few months.

He also expressed the confidence in the local banking system.

Meanwhile, President Demetris Christofias urged the nation and its political parties to show understanding and responsibility to help the country get out of the financial crisis.

Cyprus' 2010 fiscal deficit is expected to remain largely unchanged at 6 percent of GDP, compared with 2009 levels. The government has introduced austerity measures, new duties and taxes in a bid to cut the deficit in 2011 to 4.5 percent of GDP.

"Small moves and a bit of understanding can help the economy exit easily from this situation, just as it had entered. I therefore appeal to you all to help in this direction," the president said when he addressed a meeting of local business people.