Cyprus president blames opposition “alliance” for S&P donwgrade

Cyprus communist president Demetris Christofias has blamed an “alliance” intent on harming the government for a downgrade of the country's debt rating by Standard and Poor's, saying his administration could assume no blame for the cut, despite the government's refusal to tackle a growing civil service payroll with parliamentary elections in mid-May.
S&P unexpectedly cut Cyprus's sovereign rating to A- from A on Wednesday and warned more downgrades could follow because of its banking sector's heavy exposure to Greece.
“The issue of the economy is being used in an unacceptable manner, blaming the government though it has absolutely no responsibility for the recent downgrade, no responsibility at all,” Christofias told reporters.
“The responsibility lies elsewhere, with those who have created, I would say, a bloc, an alliance, to hit the government mercilessly on the issue of the economy,” he added. Christofias did not elaborate on who he thought was in this alliance.
He was answering a question on whether the state of the economy was as bad as opposition parties portrayed.
“Of course not,” he said. Opposition parties have repeatedly criticised the government for painting a rosy picture of the economy and dragging its feet on structural reforms.
Cyprus's government has pointedly distanced itself from S&P's downgrade, saying that it was clearly triggered by a situation in the banking sector it had no control over.
Finance Minister Charilaos Stavrakis on Thursday said further downgrades could not be ruled out if ratings agencies persisted in linking the island's banking sector to what was unfolding in Greece.
The Central Bank, run by ECB Governing Council member Athanasios Orphanides, is responsible for the island's banking sector. Orphanides has not made any comment on the S&P report.
However, he has repeatedly said economic reforms are needed to put the island on a sustainable growth path.
Moody's, which cut Cyprus to A2 in February, had cited fiscal slippage in addition to Greek exposure for its decision to downgrade. Fitch, which has placed Cyprus's A rating on credit watch negative, said it was worried at delays in structural reforms as well as the impact on banks from Greece.
Cyprus has struggled to contain higher deficits, weaker growth and an expensive public payroll. Its deficit is projected to fall to around 3.8% of GDP this year, from 5.3% in 2010, and its debt will hover around 60% of GDP.