France, UK in tit-for-tat over economy

2011-12-16 20:05
London - British Deputy Prime Minister Nick Clegg told French Prime Minister Francois Fillon on Friday that criticism from Paris of the British economy was "simply unacceptable".

Fillon called the British deputy premier from Rio de Janeiro to clarify his remarks about the British economy, but Clegg demanded that "steps should be taken to calm the rhetoric", the British leader's office said in a statement.

France fuelled a cross-Channel row on Friday, describing the state of Britain's economy as "very worrying" as the press in London reacted with fury to French calls for British debt to be downgraded.

The row comes after Britain clashed with France at an EU summit and refused to join members of the eurozone currency bloc in a new fiscal pact, prompting French President Nicolas Sarkozy to declare there are now "two Europes".

Despite widespread condemnation in London of criticism from Paris on Thursday, Finance Minister Francois Baroin picked up the issue again, saying the French economy was in better shape than the British one.

Debt downgrade

"It's true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment," Baroin said on Europe 1 radio.

"We don't want to be given any lessons and we don't give any," he said.

Baroin's comments came as the British press on Friday slammed French officials for suggesting that ratings agencies were targeting the wrong country for a debt downgrade by looking at France.

US ratings agencies Standard & Poor's and Moody's have warned that France is close to losing its prized triple-A debt rating over fears that eurozone members cannot control their rising debt and deficits.

"They should start by downgrading the United Kingdom, which has greater deficits, as much debt, more inflation and less growth than us," central bank chief Christian Noyer told regional newspaper Le Telegramme on Thursday.

French Prime Minister Francois Fillon then picked up on the theme, telling reporters in Sao Paolo that ratings agencies seemed to be ignoring the state of British government finances.

"We are challenged on the European currency, first of all because we are too indebted," he said.

"But we are not the only ones. Our British friends are even more indebted than we are and have a higher deficit but the ratings agencies do not seem to notice this."

Attacks

A Downing Street spokesperson said Prime Minister David Cameron had not spoken to Sarkozy, but he was expecting to hold more talks in coming days.

Asked about the French comments on Britain's economic issues, the spokesperson said: "We are very clear. We have a credible plan endorsed by numerous international organisations.

"The bond yields underline the credibility of that plan," she said, in reference to the cost to Britain of borrowing to fund its debt, which compares favourably with the benchmark German rate.

British officials would not be drawn into responding directly to the French attacks but the British press reacted furiously.

Noyer's comments were dismissed as "outrageous" and "plain wrong" by The Times.

"It is simply not the job of a central bank governor to urge the downgrading of another country's credit," it added.

Popular tabloid The Sun ran a scathing lead article attacking Noyer under the headline "Gall of Gaul".

Recession

"You find out who your friends are in a crisis," it continued. "We shouldn't be surprised, then, when the head of the Bank of France tries to better his country's economic position by sabotaging ours."

"Monsieur Noyer, you're a AAA-rated fool," it concluded.

The Daily Telegraph, which splashed "France declares war of words on Britain" on its front-page, quoted Conservative lawmaker David Ruffley calling the comments "another example of Gallic self-delusion on an epic scale".

The French attacks came ahead of presidential and legislative elections in 2012 and as France's state statistics agency warned the country will fall into a brief and mild recession through to the first quarter of 2012.

The agency said the latest surveys indicate activity is slowing sharply, with the economy expected to contract by 0.2% in the final quarter of this year and 0.1% in January through March 2012.

Timid growth of 0.1% is expected in the second quarter.

Analysts said French officials seemed to be looking to deflect attention from the country's own economic concerns.

British foreign exchange firm Moneycorp described Noyer's attack as "a clumsy attempt to divert attention from the possibility that France itself could lose its triple-A rating".
Read more on:    uk  |  france  |  economy
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