CREDIT RATINGS AGENCY Fitch has cut its rating of Cyprus, predicting that the island country will need a bailout as it struggles to overcome the aftermath of a major explosion which has crippled its economy.

A major explosion at a naval base – which was housing fuel containers seized from Iran two years ago – exploded last month, taking out the country’s largest power station.

As a result, the island has been hit by sporadic and unpredictable power cuts for weeks – grinding business to a halt and dampening the country’s chances at overcoming its current budget deficits.

Last week the DIKO party quit as a partner in the ruling coalition, just two months after the general election, leaving President Dimitris Christofias’s government with an even harder task trying to win parliamentary approval for its austerity measures, or to secure the funding to repair the Mari station.

The Cyprus Mail said Fitch today cut its rating of Cyprus’s bonds by two notches, to BBB, saying the country was likely to need a European bailout because of its difficulty in meeting its own funding needs.

“The two-notch downgrade of ratings to ‘BBB’ reflects the actual and anticipated fiscal slippage,” Fitch said, “compounded by Fitch’s expectation that the sovereign will be unable to access the international debt markets in order to refinance an increasing debt maturity profile” over the next twelve months.

Both Moody’s and Standard & Poor’s cut their ratings of the country last month – and both of them, this evening, said they were maintaining their AAA rating of France, despite market rumours that it was set to follow the United States by losing that ranking.