The Bank of Cyprus on Monday urged the government to take immediate action to prevent the country from becoming the fourth euro-zone member to seek a bailout from the European Union.
The call from the commercial bank—the island's largest financial institution—comes as discussions among Cypriot lawmakers on spending cuts appear increasingly strained.
"There is no more time left," the bank said in a statement. "We are at a crucial crossroad where we will be judged by history. It is time for immediate and effective action."
Last week, opposition parties accused the government of backtracking on pledges to enact structural reforms, while the cabinet resigned in response to public anger over a munitions blast that destroyed the island's biggest power station, causing an energy shortage.
Cyprus's banks are sitting on an estimated €5 billion ($7 billion) in Greek sovereign debt, and its economy is heavily exposed to Greece through trade.
The country was already wrestling with modest growth and possible contagion from Greece when a July 11 blast reduced the island nation's largest power plant Vasilikos to rubble. The explosion that killed 13 people was caused by 98 containers of munitions, confiscated from an Iranian frigate, that accidentally detonated nearby.
All three major credit-rating companies have downgraded Cyprus in recent months because of its exposure to Greece and widening deficits.
On Friday, Standard & Poor's Corp. downgraded it again by one notch to BBB+ and warned that another cut was possible, citing the government's inconsistent commitments to spending cuts as well as exposure to fiscally stressed Greece.
That followed a two-notch downgrade Wednesday by Moody's Investors Service, which cited the country's weak fiscal position, fractious political climate and close economic ties to Greece.
So far, the island's conservative banking sector has avoided government handouts, remaining profitable despite the economic crisis. But Cypriot bond yields have risen sharply in recent months, underlining market concerns about fallout from a possible Greek default. Moody's downgraded Cyprus two notches in February.
Nicosia also has €2 billion in debt coming due in the first quarter of 2012, which will require significant savings.
Last week, Moody's downgraded Greece three notches deeper into junk territory, warning that its new bailout deal with the euro-zone implies a temporary sovereign default and sets a bad precedent in the 17-country euro area. - WSJ
The call from the commercial bank—the island's largest financial institution—comes as discussions among Cypriot lawmakers on spending cuts appear increasingly strained.
"There is no more time left," the bank said in a statement. "We are at a crucial crossroad where we will be judged by history. It is time for immediate and effective action."
Last week, opposition parties accused the government of backtracking on pledges to enact structural reforms, while the cabinet resigned in response to public anger over a munitions blast that destroyed the island's biggest power station, causing an energy shortage.
Cyprus's banks are sitting on an estimated €5 billion ($7 billion) in Greek sovereign debt, and its economy is heavily exposed to Greece through trade.
The country was already wrestling with modest growth and possible contagion from Greece when a July 11 blast reduced the island nation's largest power plant Vasilikos to rubble. The explosion that killed 13 people was caused by 98 containers of munitions, confiscated from an Iranian frigate, that accidentally detonated nearby.
All three major credit-rating companies have downgraded Cyprus in recent months because of its exposure to Greece and widening deficits.
On Friday, Standard & Poor's Corp. downgraded it again by one notch to BBB+ and warned that another cut was possible, citing the government's inconsistent commitments to spending cuts as well as exposure to fiscally stressed Greece.
That followed a two-notch downgrade Wednesday by Moody's Investors Service, which cited the country's weak fiscal position, fractious political climate and close economic ties to Greece.
So far, the island's conservative banking sector has avoided government handouts, remaining profitable despite the economic crisis. But Cypriot bond yields have risen sharply in recent months, underlining market concerns about fallout from a possible Greek default. Moody's downgraded Cyprus two notches in February.
Nicosia also has €2 billion in debt coming due in the first quarter of 2012, which will require significant savings.
Last week, Moody's downgraded Greece three notches deeper into junk territory, warning that its new bailout deal with the euro-zone implies a temporary sovereign default and sets a bad precedent in the 17-country euro area. - WSJ
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