Cyprus said on Thursday it was surprised at the timing of a Moody’s downgrade but remains focused on steering Greek exposed banks and a recession-hit economy to safety.

A day earlier, Moody’s Investors Service cut the credit rating of Cyprus by two notches, citing the nation’s close links to Greece and the rising likelihood that Athens will exit the eurozone.

The Finance Ministry said it “cannot but observe that it is surprising the current downgrade comes just three days before the Greek elections and about two weeks before the deadline for completion of the recapitalization of banks and while the Republic of Cyprus is considering all possible alternative options.”

However, the ministry said it “acknowledges the challenges” Cyprus is called on to confront.

“The government remains focused on achieving the fiscal commitments, to secure the necessary resources to meet the financial needs of the state and, in cooperation with the central bank, to manage the challenges of the banking system.”

Moody’s downgraded Cyprus’s government bond ratings from Ba1 to Ba3, and placed them on review for further possible downgrade.

It said the the key reason for that was the “material increase in the likelihood of a Greek exit from the euro area, and the resulting increase in the likely amount of support that the government may have to extend to Cypriot banks.” The rating agency added, “This risk is exacerbated by the fact that the country’s finances are already strained and access to the international markets is still denied.”

Those risks have the potential to rise in the aftermath of Greek parliamentary elections on Sunday, Moody’s said. The vote could lead to the country’s exit from the eurozone, which would likely spark deep financial turmoil.

On Tuesday Moody’s downgraded two Cyprus banks -- Bank of Cyprus and Hellenic Bank -- citing their large exposure to a possible Greek euro exit. Cyprus Popular Bank, currently at B3 -- lower than the other two -- was placed on review for a possible downgrade.

[AFP]- Εkathimerini.com