S&P keeps Cyprus on credit watch

 * Awaits details of new fiscal package * 

Standard and Poor's said on Monday Cyprus's sovereign ratings remained on a credit watch pending the outcome of consultations for a new economic austerity package on the island.
On Thursday, Moody’s said the outlook on Cyprus's banking system remains negative.
"Should the parliament approve what we view as a credible budgetary consolidation package, and if potential losses associated with the restructuring plans of Greek sovereign debt remain at current anticipated levels, assuming all other factors remain the same, we could affirm our 'BBB+' long-term and 'A-2' short-term foreign-currency ratings on Cyprus," Standard and Poor's said in a statement.
But it said that if it judged that there was a lack of timely and credible fiscal adjustment, which it thought was likely to require significant spending cuts, or if the proposed Greek restructuring package results in bigger losses for Cypriot banks than currently anticipated, it could lower its ratings on Cyprus.
It said announcements were expected later this month.
Cyprus has been downgraded by all three major ratings agencies in the past two months as the fiscal difficulties of the Mediterranean island have intensified after a munitions blast which destroyed the island's largest power station on July 11.
The island's banks are also heavily exposed to Greece. All three of its major banks booked losses in the first half from their voluntary participation in a Greek sovereign debt swap.
The island's parliament approved an initial austerity package on August 26 cutting public sector salaries and increasing taxation on real estate. Authorities say they will submit new proposals to parliament by September 15, targeting tax evasion, while there is also a pending government proposal to raise VAT to 17% from 15%.
Authorities say they also hope to clinch a deal with labour unions to suspend wage indexation, under which public sector workers receive increments based on inflation, for a brief period.