Credit ratings of troubled European sovereigns have been on a remorseless downward slide. So Standard & Poor’s decision to upgrade Latvia last week was a welcome reminder that such assessments can still move in two directions. Not only did the agency raise its rating one notch but it shifted Latvia back to investment grade status, with a stable outlook.

Whether this offers much cheer to other struggling EU governments is debatable. Few countries have had a boom-to-bust experience like Latvia’s. A credit bubble during the 2000s contributed to rapid, consumption-fuelled expansion. (Growth in gross domestic product averaged more than 9 per cent between 2002 and 2007, according to EU statistics.) And when international lenders had to intervene in 2008, the braking was correspondingly severe. In 2009, GDP contracted a massive 18 per cent.

Perhaps surprisingly, Latvia’s turnround is not the product of currency devaluation: although outside the eurozone, the authorities kept the lat pegged to the euro. But attributing it simply to austerity would also be wrong. True, the government’s fiscal deficit, which had surged to 9 per cent of GDP in 2009, was slashed to 3.5 per cent last year, but budgetary imbalances were always a less endemic problem than in most ailing European peripherals.