'Unfair' Moody's upsets government, but economists call attention to debt factor

Governments all over Europe reacted angrily to yesterday's downgrade by credit ratings agency Moody's, which slashed Malta's status (among those of other countries) from A2 to A3.

Prime Minister Lawrence Gonzi reacted by insisting that his government's deficit-reduction programme was on track, and that its debt status was not threatened by exposure to foreign lending.

Finance Minister Tonio Fenech went one step further, acknowledging his personal frustration at the news.

"I must admit that I'm disappointed with Moody's rating, also because during the communication we had, the agency did not refer to anything specific in Malta but continually referred to the international climate scenario," Fenech said.

However, leading economist Lino Spiteri warned that part of the reason for the downgrade remains Malta's weak debt metrics: a factor independent of the international crisis..

"There is no doubt that the external situation was influencing Malta badly," he told MaltaToday, "but if Moody's are motivating their cuts on the basis of (Malta's) weak debt metrics, then that is a domestic factor and references to the island's economic performance do not remove that particular factor".

Read more in todays midweek edition of MaltaToday