Moody's Investors Service yesterday upgraded the ratings of Malta and Cyprus following the introduction of the euro currency.
The credit ratings agency upgraded the foreign and local currency government bond ratings of Malta to A1 from A2 and that of Cyprus to Aa3 from A1. The outlook on these ratings was changed to stable from positive.
Both countries joined the eurozone on Tuesday. Accordingly, the country ceilings for debt and bank deposits of both Cyprus and Malta were also withdrawn and replaced with the eurozone's regional Aaa ceilings, which have a stable outlook.
The rating actions had been clearly signalled by Moody's since mid-2007, following the European Commission's approval of the countries' entry into the eurozone.
In fact, last July, credit rating agencies Moody and Standard and Poor's had upgraded their ratings for Malta after the island was given the final approval to join the eurozone.
Moody's had upgraded Malta's ratings for long-term foreign and local currency government bond and the long-term country ceilings for foreign currency bank deposits had been upgraded from A3 to A2.
Tristan Cooper, vice president and senior analyst in Moody's Dubai office said yesterday: "Moody's views the adoption of the euro by Cyprus and Malta as a significant credit positive because it all but eliminates the risk of a currency crisis, thereby insulating their economies from external financial shocks".
Yesterday's rating actions on the countries' government bonds are further supported by the strengthening economic fundamentals of Cyprus and Malta.
"In recent years, both countries have successfully implemented fiscal consolidation programmes that have narrowed their fiscal deficits and reversed the previous upward trend in their public debt. The gross general government debt burdens of Cyprus and Malta have now dropped just below the eurozone average," Mr Cooper added.
In a separate report last month, Moody's described Malta's banking system outlook for Malta as remaining highly concentrated but, nevertheless, it continues to record good performance thanks to growth in household credit.
Agencies such as Moody's are considered important because they measure credit worthiness, the ability to pay back a loan and affects the interest rate applied to loans. When contacted, Parliamentary Secretary Tonio Fenech said the ratings agency had given a clear message that Malta provides economic stability and peace of mind for those willing to invest.
During the so-called ERM 2 phase, the ratings agencies had made it very clear that the upgrade could only be achieved if Malta kept proceeding towards the introduction of the euro, he said.
Mr Fenech underlined the importance of credit institutions such as Moody's as he recalled that the country's ratings had been downgraded when Malta had frozen its EU application 10 years ago.
"Today's upgrade is the result of the government's wise roadmap... It also clearly shows that, contrary to the warnings of some people, we didn't introduce the euro too soon."