23/07/2010 09:00
The first reactions of the Finance Ministry’s managerial team to the creditwatch negative of Standard and Poor’s and the revelation that the government expects that debt will reach 70% of GDP and not 56% were reassuring.
The difference is attributable to the co-calculation of the special bonds that the government issued in December to the benefit of the banks for an interest rate cut. S&P believe that the special bonds are the Republic’s obligation and included them in their calculations for the Cypriot debt.
The Ministry allegedly tried to convince S&P via a number of letters that this obligation of €3 billion is covered by the assets that the banks allocated to the state.
But S&P were not convinced. The Finance Ministry technocrats noted yesterday that the firm follows the same methodology for all euro area countries, unlike the methodological remarks of Eurostat.
Managerial staff of the Finance Ministry told StockWatch yesterday that Firch and Moody’s did not expressed the same concerns for the obligations from the special bonds and they are not expected to change the way of calculation of the Cypriot debt.
Fitch have already announced that they keep Cyprus’s rating stable, while Moody’s, which were recently in Cyprus, are expected to issue their decision in the next few months.
The Finance Ministry technocrats noted that even for S&P the special bonds do not affect the calculation of the debt as much as other obligations do. “If it was so, the firm would have downgraded Cyprus”, they said.
The difference is attributable to the co-calculation of the special bonds that the government issued in December to the benefit of the banks for an interest rate cut. S&P believe that the special bonds are the Republic’s obligation and included them in their calculations for the Cypriot debt.
The Ministry allegedly tried to convince S&P via a number of letters that this obligation of €3 billion is covered by the assets that the banks allocated to the state.
But S&P were not convinced. The Finance Ministry technocrats noted yesterday that the firm follows the same methodology for all euro area countries, unlike the methodological remarks of Eurostat.
Managerial staff of the Finance Ministry told StockWatch yesterday that Firch and Moody’s did not expressed the same concerns for the obligations from the special bonds and they are not expected to change the way of calculation of the Cypriot debt.
Fitch have already announced that they keep Cyprus’s rating stable, while Moody’s, which were recently in Cyprus, are expected to issue their decision in the next few months.
The Finance Ministry technocrats noted that even for S&P the special bonds do not affect the calculation of the debt as much as other obligations do. “If it was so, the firm would have downgraded Cyprus”, they said.
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