Premier and Finance Minister Paula Cox received a welcome boost when ratings agency Fitch affirmed Bermuda's strong AA+ credit rating this week.

In practical terms, a downgrade could have increased Bermuda's borrowing costs.

In psychological terms, the affirmation means that a reputable international agency says that Bermuda is headed in the right direction, and that is a vital selling point for the Island.

Conversely, a downgrade could have had a dangerous psychological impact.

The report did not say there weren't challenges ahead; it noted that potential changes in the tax regime of other countries targeting companies domiciled in offshore jurisdictions could pressure Bermuda's competitiveness, while continued economic contraction would affect Government finances.

But those concerns were offset by the Government's still strong fiscal position, and the fact that the financial system weathered the crisis without any fiscal cost to the government. (The Butterfield Bank guarantee did not involve Government spending any money).

Curiously, Fitch said Bermuda had recorded sustained current account surpluses, when that was not true in the last two financial years.

But it said Bermuda's debt level – 16.2 percent of gross domestic product – contrasted favourably with the global average of more than 60 percent.

All of that is true, apart from the current account surplus claim. However, Fitch also noted that Bermuda's narrow economy, which depends almost entirely on international business, makes it vulnerable to economic shocks, while it has fewer monetary tools on hand to guide the economy through good times and bad.

So that demands that Bermuda should run a stricter financial regime than many other larger countries. Getting the debt down to ten percent or less of GDP must be the goal at the same time that economic growth needs to be encouraged.

Indeed, in this newspaper on Monday, columnist Nathan Kowalski predicted that the Bermuda economy, far from beginning to recover, was likely to contract a further one percent in 2010 and the evidence in the local economy seems to support that.

Layoffs and redundancies are continuing, and are likely to worsen in January, while local spending figures remain extremely poor.

While tourism has staged a weak recovery, it has a long way to go to get back to the levels of just three or more years ago, and international business, while more or less stable, is not growing much in terms of jobs, despite some stellar earnings reports.

Equally, the threat to Bermuda's standing as a financial domicile from Switzerland is real and cannot be ignored.

In terms of employment and quality jobs, there is a tendency to focus on term limits as the sole concern of businesses. But the overall cost of employment in Bermuda and the relatively limited pool of potential staff can't be discounted.

Controlling costs and raising the educational standards of entry level employees are equally important.