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Ups & Downs Following Fitch Ratings’ upgraded sovereign rating of Estonia to A+ in July, Standard & Poor’s made an August Estonian upgrade to AA-.

On the international financial media scene Estonia’s upgradings drowned in the news on S&P’s downgrading of the US rating to AA+ from its former top rating AAA. This was the first time the US had been downgraded since it was originally given an AAA rating by Moody's in 1917.

As for Estonia, S&P said that it believes in "Estonia's strong economic flexibility and improving external competitiveness against the challenges inherent in adapting the economy to lessen its reliance on external funds."

As additional reasons for Estonia’s upgrading S&P cited “the clear commitment of Estonia's political parties to support and implement budgetary and structural policies to address the effects of severe economic recession and low government sector debt”.

Ülo Kaasik, Deputy Governor of Estonia’s Central Bank, said that the upgradings show a growing trust in Estonia’s economy.

- The ongoing Eurozone credit crisis shows once again how important it is to keep national finances in order. That is why we need to follow through on our budget strategy and achieve budget surplus in 2013. We also need to improve the mechanism of budgetary policies in order to curb the growth of expenses more efficiently in the future, said Ülo Kaasik.

- Growing export performance helped Estonia to recover from the deep recession. However, we should keep a close eye on external developments, because uncertainties on the future remain strong. Being a small, open economy, we also need to use the improved economic situation to replenish our reserves, concluded Ülo Kaasik.

As for the USA, financial analysts had expected the downgrading based on the country’s huge foreign debt and the political turmoil preceding the agreement on the terms connected to raising the US debt ceiling. According to the BBC, S&P had "lost confidence in the ability of the United States government to make decisions”.

The US foreign debt as per end of August this year is estimated to be more than 15 trillion USD (15 000 000 000 000 USD), an amount now being bigger than the estimated US GDP. As a comparison Estonia’s and Sweden’s 2011 foreign debts are estimated to end up at 7,7% and 42% of their GDP’s respectively. As for credit ratings, Sweden remains on a top AAA level.

Credit Rating Agencies – CRA’s

There are only three CRA’s who can be said to have a global impact. All three – Moody’s, Standard & Poor’s and Fitch Ratings - are US institutions, and called ‘The Big Three’ their total share of impact on the global credit rating market is estimated to be 94%.

Their up- and down-gradings of nations are not undisputed, and the autumn issue of focus, the magazine of the Swedish Chamber of Commerce in Estonia, will take a closer look at their global oligopoly.