The key drivers for today‘s rating action are:

1. Ongoing concerns about Cyprus‘s fiscal position, which are amplified by the fiscal and economic consequences of the destruction of the Vasilikos power plant on 11 July 2011.

2. The increasingly fractious domestic political climate, which has increased implementation risks to the government‘s new fiscal plans.

3. The material risk that at least some Cypriot banks will require state support over the medium term as a result of their exposure to Greece.