The downgrade of Malta’s credit rating by Fitch is the first for five years and the international agency is warning it may issue another if the next Budget “fails to deliver a credible medium-term consolidation plan” to stabilise debt levels.

The Government and Opposition were yesterday engaged in a public relations ‘war’, blaming each other for the lower credit rating.

We warned the Government of the consequences of its actions and we now have the results- Tonio Fenech

Last Friday, Fitch – one of the world’s three main credit rating agencies – said it had downgraded Malta’s credit rating from ‘A+’ to ‘A’.

The announcement, which according to Government sources came as a surprise, puts Malta back to its original pre-eurozone situation.

The last time Fitch revised Malta’s rating upwards was in 2008 after the country officially adopted the euro. Despite higher deficits reported during the past five years than the one for 2012 (3.3 per cent of GDP), Fitch still maintained Malta’s rating at ‘A+’.

The agency has now changed tack arguing that the re-opening of the Excessive Deficit Procedure by Brussels last May and the lack of detailed plans by the Government are making the situation worse.

“In Fitch’s view, the authorities’ response to the 2012 fiscal deteriorations has been slow. Although the newly elected government has committed to fiscal consolidation and pledged to exit the EDP by 2014, as yet there has been no clarity around the fiscal measures underpinning the adjustment,” Fitch said.

Reacting yesterday, Finance Minister Edward Scicluna blamed the outgoing administration for the downgrade and said it reflected “the consequence of the poor fiscal performance registered during 2012.”

He added that Fitch’s report does not reflect the recent agreement with China to buy a stake in Enemalta and reduce the corporation’s debt levels.

Nationalist Party finance spokesman Tonio Fenech said the downgrade was a direct result of Labour’s decision to inflate last year’s deficit without taking any corrective measures.

“We warned the Government on the consequences of its actions and we now have the results”, Mr Fenech said.

Only last December, Fitch said that despite a possible change of government to Labour, there was no short-term risk for the Maltese economy and it had no intention of downgrading Malta’s credit rating.

Labour had publicly welcomed these comments and interpreted them as “further confirmation on how irresponsible the PN was when trying to cast doubts on a new Labour government”.

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