Moody’s decision to downgrade Malta sparked a lukewarm reaction from the government initially but became stronger in the afternoon after the opposition addressed the press on the matter.
The agency lowered Malta’s sovereign rating to A3 from A2 on Monday night, the second downgrading in a few months, putting it on a par with troubled countries Italy and Spain.
In the morning, Prime Minister Lawrence Gonzi attributed the downgrade to the economic woes across Europe arguing that Malta was being implicated because it had one of the most open economies.
But after Opposition Leader Joseph Muscat said the downgrade confirmed Labour’s fears over the government’s increasing debt, Finance Minister Tonio Fenech slammed Moody’s decision as “unjustified”.
He also lashed out at Dr Muscat, accusing him of rubbing his hands with glee, speaking irresponsibly and getting his analysis of Moody’s decision wrong.
“There is a lot of worry out there and we don’t need an opposition stirring more worry,” he said, adding that dampening the perception of Malta’s economy could have a direct impact on jobs. Mr Fenech said he was “disappointed” with the credit rating agency’s decision and invited it to come and see for itself that Malta should not be lumped with others through this “unfortunate, blanket approach”.
“We are faring better than other countries, so we should not be treated in the same way ... We shouldn’t be thrown in the same basket when we acted differently,” he said, pointing out that Moody’s gave no specific reasons for Malta’s downgrade.
He said the agencies were being “overcautious” but Malta’s economic fabric was different to those of other countries in the region.
Moody’s, which operates from the US and took its decision after a tele-conference (with the ministry), could have lumped Malta with other countries purely because of its geographical position, Mr Fenech said.
But the problems in Italy and Greece had little direct impact on Malta whose economy was much more dependent on countries like Germany.
On the other hand, Mr Fenech pointed out that, “in reality”, such downgrades had little impact on Malta because the island’s debt was predominantly domestic.
Malta was in fact borrowing at lower interest rates than in 2010 and “real investors” were being more optimistic than the credit rating agencies.
However, he stressed that the downgrade could affect the way investors perceived the country.
Asked whether the government could have done anything to be more convincing about its economic position, Mr Fenech admitted this was possible, adding that the government would make an effort to conduct meetings with the credit rating agencies.
“We must continue driving the message that our finances are on a sound footing,” he said when asked whether the government could do anything differently.
Earlier, during a visit to a financial services company called EMD, Dr Gonzi insisted that Malta was on the right course of narrowing its deficit and reducing its debt, but it had one of the most open economies and was, therefore, vulnerable to the situation in source markets.
He said the government would keep its emphasis on education and deficit reduction, such as by including the golden rule on balanced budgets in the Constitution.