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Eurozone and the Risk of a Cyprus Exit

Posted by Joseph Trevisani on Mar 27, 2013 5:44:00 PM

The risk of a euro exit by Cyprus is substantial, but not a central scenario, Moody's Investors Service says. "Following the economic dislocation that will be caused by the restructuring of the island's two largest banks and the imposition of capital controls in the country, it is possible that the risk of euro exit will increase further. If that were to occur, the maximum rating Moody's would assign to Cypriot securities would fall further," Moody's says, while lowering its assessment of the highest rating that can be assigned to a domestic debt issuer in Cyprus to Caa2, based on the increasing risk of an exit by the country from the euro area. Any rating actions taken as a result of the new country ceiling will be released during the coming week, Moody's says.

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