You're reading: Cyprus president to reshuffle Cabinet

NICOSIA, Cyprus (AP) — Cyprus President Dimitris Christofias will go ahead with a broad Cabinet reshuffle, a government spokesman said Wednesday, amid an economic and energy crisis caused by a blast that knocked out the country's main power station and killed 13 people.

The move comes after the ministers of defense and foreign affairs resigned over the explosion earlier this month.

Christofias will ask the remaining ministers in the 11-member Cabinet to submit their resignations at a meeting Thursday so he can proceed with the reshuffle, government spokesman Stefanos Stefanou said.

Christofias has been under pressure for a Cabinet reshuffle in a bid to salvage his government’s credibility amid a groundswell of public anger over the July 11 explosion of seized Iranian munitions that has prompted calls for him to resign.

The munitions were packed inside 98 containers that were left stacked in an open field at a naval base a few hundred meters from the power station since being seized from a Cypriot-flagged ship in 2009 that the U.N. said breached a ban on Iranian arms exports.

The reshuffle announcement came a few hours after the center-right DIKO party, the junior partner in the governing coalition, said it had asked its two ministers to resign in order to speed up tough decisions needed to prop up the economy. The foreign minister was also a DIKO member.

Moody’s agency downgraded Cyprus’ credit rating by two notches earlier Wednesday from A2 to Baa1 over concerns about the blast’s economic toll, a "fractious political climate" and the banking system’s exposure to bailed-out Greece.

The agency also slapped the country with a negative outlook and reduced its growth forecasts for the island to 0 percent and 1 percent in 2011 and 2012, respectively — a drop of around 1.5 percent from EU growth estimates for both years.

Interior Minister Neoclis Sylikiotis said EU experts estimate that the blast will cost the island’s €17.4 billion economy around €2 billion ($2.89 billion). Damage to the Vasiliko power station that generated more than half of the island’s power output and will take a year to become fully operational again is estimated at €€700-800 million ($1-1.15 billion).

Cyprus’ top banker last week warned that the blast may force Cyprus to seek a bailout if deep spending cuts aren’t made swiftly.

The government and opposition leaders agreed last week on a first package of cost-cutting measures to buoy the economy in the wake of the blast.

But there is still disagreement on how deep cost cuts should go, especially to the public payroll that takes up about a third of the island’s €8 billion ($11.58 billion) budget.

Parties have accused the government of already dithering on the measures, but the finance minister said the government is committed to implementing them.