Fitch boosts Cyprus, Malta

Fitch Ratings said it upgraded the ratings of Cyprus and Malta following the decision of the E.U. Council on July 10 that both countries have met the Maastricht criteria and will adopt the euro in January 2008.

Cyprus's long-term foreign-currency issuer default rating has been upgraded to AA- from A+. Malta's long-term foreign-currency issuer default rating has been upgraded to A+ from A. Fitch also said it aligning the foreign- and local-currency issuer default ratings as both countries' currencies are assimilated to the euro. Cyprus's local-currency issuer default rating is revised to AA- from AA and Malta's local-currency issuer default rating is revised to A+ from AA-. Fitch has changed the outlooks for both countries to stable from positive, and their country ceilings are upgraded to AAA from AA+ for Cyprus and from AA for Malta. Cyprus's short-term foreign-currency issuer default rating is upgraded to F1+ from F1 and Malta's short-term foreign-currency issuer default rating is affirmed at F1.

The council's acceptance of Cyprus and Malta into the euro area justifies an immediate upgrade in the ratings as Fitch said that euro-area membership enhances sovereign external creditworthiness.

The benefits include greater price transparency, lower transaction costs, increased investment, trade and capital flows and lower capital costs, the agency said.

There are some offsetting disadvantages, most noticeably the "one size fits all" nature of monetary policy within the European Union, but Fitch said these are outweighed by positive factors.

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