U.S. ratings agency Fitch has downgraded Cyprus to "junk" status, prompted by the amount of rescue money that would be needed to bail out its banks, which are heavily exposed to the Greek economy.
It lowered the rating for the country — one of the smallest members of the 17-country group that uses the euro — by one notch to BB+ from BBB- on Monday and warned further downgrades were possible in coming months due to a possible worsening of the situation in Greece.
With this downgrade, Fitch joins the other major ratings agencies — Moody's and Standard & Poor's — in pushing Cyprus' credit rating into junk territory.
Cyprus is scrambling to find about $2.3 billion — or about 10 per cent of its gross domestic product — by a June 30 deadline to recapitalize its second largest lender, Cyprus Popular Bank. The lender is the most heavily exposed of the country's banks to Greek government debt. Cypriot officials have said that they would seek foreign aid from fellow eurozone nations or from Russia, or a combination of the two.
Fitch estimates Cyprus will need another $5.2 billion to recapitalize its banking sector due to their Greek exposure and because of a rise in bad loans over the last year as the Cypriot economy has shrunk and unemployment has risen to record levels. Cypriot banks will also suffer more losses on loans to Greek businesses and households as the Greek economy continues to contract.

reporternet.com