France Attacks Britain

French leaders have launched outspoken public attacks on Britain, calling for the UK to lose its AAA credit rating and comparing its economy with that of Greece.

Christian Noyer, the governor of the Bank of France, said that Britain faced larger national debts, higher inflation and slower growth than France.

François Baroin, the finance minister, said Britain was “marginalised” and faced “a very difficult economic situation” because of Coalition policies.

The blunt remarks are the latest sign of Anglo-French tension following David Cameron’s refusal last week to back a new European treaty drawn up in response to the eurozone crisis.

George Osborne, the Chancellor, also provoked anger in France recently by suggesting it could be the next eurozone economy to experience a debt crisis. France and Germany want a new treaty to create a “fiscal union” of eurozone members, to control their deficits and reassure the markets.

Mr Baroin told the French parliament that the pact had been backed by every country in Europe, “with the singular, now solitary, exception of Great Britain, which history will remember as marginalised”.


He added: “Great Britain is in a very difficult economic situation, a deficit close to the level of Greece, debt equivalent to our own, much higher inflation prospects and growth forecasts well under the eurozone average. It’s an audacious choice the British government has made,” he said.

French policymakers were angered last week when Standard and Poor’s, a ratings agency, threatened to downgrade eurozone nations — including France — if leaders did not act urgently to address the single currency crisis.

But in an interview with Le Télégramme, a French regional newspaper, Mr Noyer said the downgrade did not appear “justified in regard to the economic fundamentals”.

“Otherwise, they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and whose credit is collapsing,” he added.

Downing Street rejected the French remarks, claiming that international bond markets, which buy government debt, have more confidence in Britain than France.

The interest rate – or yield – on British government bonds is around 2.2 per cent. The French rate is around 3.2 per cent

No 10 said: “We have put in place a credible plan for dealing with our deficit and the credibility of that plan can be seen in what has happened to yields in this country.”

Senior British sources said French leaders were so panicked by the prospect of losing their AAA credit rating that they were trying to spread confusion by undermining the economic reputations of other nations.

One government source said: “It’s so obvious what they are up to. They are in a completely different place to us. Where do you hide a tree? In a wood.”

David Ruffley, a Conservative member of the Treasury select committee, criticised the remarks. “This is another example of Gallic self-delusion on an epic scale,” he said. “They are tied to a currency that could become a basket case at any moment.”

Jesse Norman, another Conservative Treasury committee member, said Mr Noyer had misunderstood the agencies’ warnings.

“The view of the ratings agencies does not simply reflect the fundamentals of the French economy, but also the continuing failure to resolve the eurozone crisis,” he said.

“At root, this is an expression of anxiety at a failure of political leadership in the eurozone.”

Consumer-price inflation in France is 2.2 per cent, half the British rate. According to the Organisation for Economic Co-operation and Development, France’s debts will be 98.6 per cent of gross domestic product this year. For Britain, the figure is 90 per cent.

The French economy grew at a 1.6 per cent rate in the third quarter of 2011, but is expected to hit a standstill in 2012. For Britain, the comparable figures are 0.5 per cent and 0.6 per cent.

Economists say credit ratings do not reflect only economic fundamentals but also look at government policies and the chance that deficits will be curbed and loans repaid.

Mr Noyer kept up the French criticism of the agencies in his interview, saying their arguments were “more political than economic”.

The attacks on Britain and its policies are the latest sign of hostility following last week’s Brussels summit, where Mr Cameron clashed with Mr Sarkozy. Earlier this week, it was reported that Mr Sarkozy had later described the Prime Minister as behaving like a “stubborn child” over his demand for legal safeguards for the City of London.

The two leaders worked closely together during the Nato campaign against Libya, but relations have been strained in the eurozone crisis.

As well as irritation over Mr Osborne’s remarks, French leaders have been angered by what they see as Mr Cameron’s criticism of them over their economic policies.

At another summit earlier this year, Mr Sarkozy attacked Mr Cameron over the crisis, telling him he had “missed a good opportunity to shut up”.

Last night, there were reports that European diplomats were conspiring to overturn British-backed safeguards agreed earlier this year to protect the City.

Mr Osborne had secured technical changes to pan-European rules regulating the trading of derivatives which protected the City’s dominant position in the market. Talks which will continue today are discussing removing the safeguards.

“This acts as a strong reminder that exercising the UK veto last week does little to strengthen the British hand on a range of issues of great importance to the UK financial system,” Richard Reid, research director for the International Centre for Financial Regulation, said.

The changes could lead to another stand-off between British ministers and their European counterparts.