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Eurozone crisis

S&P ratings agency warns that Cyprus faces default

Standard & Poor's has warned that Cyprus risks going into default if international lenders fail to come to the country's rescue soon. Debt-hit Cyprus is looking to secure emergency funding amid its political turmoil.

On Wednesday, the ratings agency Standard & Poor's warned that Cyprus was facing a "material and rising risk" of defaulting on its national debt.

Noting a "one-in-three chance" that the country's sovereign debt rating might be lowered in 2013, S&P warned especially against failure by the eurozone and the International Monetary Fund to provide swift bailout funding.

Cyprus faces change of power

According to S&P, this would leave Cyprus few choices apart from restructuring financial obligations - a move that would automatically earn the country a default rating.

Cyprus urgently needs 17 billion euros ($23 billion) to shore up its ailing banks and to finance government expenditures over the next three years. However, bailout negotiations have been delayed by concerns about the country's debt sustainability, as well as by German charges of tax evasion and money laundering in the banking sector.

In addition, the crisis-stricken eurozone country is gearing up for a run-off presidential election on Sunday, with the two main candidates far apart on the issue of imposing sweeping austerity measures.

S&P warned that the country's debt rating could also be lowered if the agency believed that national authorities were not able to fulfill the conditions attached to a future bailout.

The country's sovereign debt is currently rated CCC+ with a negative outlook by Standards & Poor's, which means a noninvestment or "junk bond" grade.

uhe/mkg (Reuters, dpa)

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