Cyprus` Ministry of Finance has called for consensus among political parties with a view to conclude to a fiscal consolidation package, as Moody`s rating agency downgraded on Wednesday Cyprus`s government bonds to Baa1 from A2.

In downgrading the Cypriot economy, Moody`s sighted the ongoing concerns about Cyprus` fiscal position, which are amplified by the fiscal and economic consequences of the destruction of the Vasilikos power plant on 11 July 2011, caused by a massive explosion at the nearby “Evaggelos Florakis“ naval base, the increasingly fractious domestic political climate, which has increased implementation risks to the government`s new fiscal plans and 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.

In a press release, the Finance Ministry said it agrees with Moody`s rationale that the destruction of Cyprus` main power station further deteriorates the economy both in terms of economic growth and in terms of public finances, as well as with Moody`s view that a climate of political consensus is necessary given the difficult juncture in which the Cypriot economy is in.