War of words between France, Britain heats up

PARIS / FRANKFURT - Agence France-Presse

Britain’s Chancellor of the Exchequer George Osborne (L) talks with France’s Finance Minister Francois Baroin (R) at the start of a EU meeting in Brussels on Nov 30. REUTERS photo

French Finance Minister Francois Baroin raised concerns about the state of the British economy on Friday and said France was in better shape.

“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, fuelling a British-French row that broke out Thursday when senior French officials criticized the British economy, arguing that ratings agencies are targeting the wrong country for a debt downgrade.

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

Noyer also warned that Britain, which clashed with France at last week’s EU crisis summit and refused to join the members of the eurozone single currency bloc in a new fiscal pact, was facing a credit crunch.

The British press reacted furiously on Friday.

His 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 said. “There is only one good answer when asked about another country’s rating. ‘Sans commentaire’.”

Popular tabloid The Sun ran a scathing leading article attacking “treacherous” Noyer under the headline “Gall of Gaul.”

“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 carried “France declares war of words on Britain” as its front-page headline, also quoted Conservative lawmaker David Ruffley calling the comments “another example of Gallic self-delusion on an epic scale.”

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.

Britain to send in ‘experts’

Meanwhile, Britain plans to sent experts to eurozone talks on new regulations aimed at saving the single currency union after London rejected new EU measures aimed at reinforcing fiscal discipline, Poland said on Friday.

“Over the last 24 hours we have learned that Great Britain will send experts to meetings on the new regulations,” Poland’s Foreign Minister Radoslaw Sikorski said on Friday.

In another development, European Central Bank (ECB) governing council member Yves Mersch warned of the dangers of a credit crunch in the wake of the debt crisis in the 17-nation eurozone on German television late Thursday.

“We fear a credit crunch, which could push our economies - even the strongest - into a new recession,” Mersch, who is head of the Luxembourg central bank, said on ZDF public television.
“For us, it’s not about banks making profits, it’s about them supplying the economy with credit,” Mersch said, justifying the recent raft of measures undertaken by the ECB to keep the banking sector flush with liquidity.

Banks provided as much as 75 percent companies’ financing in the eurozone, he noted.
Mersch reiterated the ECB’s opposition to the creation of eurobonds, saying “that would be a solution only if all countries had triple-A ratings.”