16 Dec 2011

Anglo-French spat as Paris faces downgrade

With the war of words continuing over the relative health of the British and French economies, money market rumours suggest France could have its credit rating downgraded, as Jane Deith reports.

The famous French sang-froid seems to have run out. Their blood is up over warnings they could fall into recession next year and over threats to the government’s AAA credit status, stoked by rumours on the money markets that a downgrade could come soon from a leading credit rating agency.

This seismic prospect comes as the economic war of words between France and Britain escalates. The French central bank, and now the French finance minister, have both poured scorn on the UK economy. Downing Street, for its part, insisted its fiscal plans are both credible and working.

From an economic standpoint, we prefer being French than British. Francois Baroin, French finance minister

Francois Baroin, France’s finance minister, today said Britain’s economy was “worrying” and that, right now, he would rather be French than British.

“We don’t have any lessons to give,” he said, “but we don’t want to be given any lessons either. We were given a few, and it’s true that the economic situation in Great Britain is very worrying and that today, from an economic standpoint, we prefer being French than British.”

After similar comments from the governor of the Bank of France, things were turning frosty. Yesterday Christian Noyer said basic economic fundamentals should lead to Britain being downgraded before France, because it had more debt and less growth.

Read more: Is the French economy beating Britain's?

‘Calm the rhetoric’

The French prime minister, Francois Fillon, phoned Nick Clegg today to try to explain. Nick Clegg told him – in French – the comments had been simply “inacceptables” and that France needed to “calm the rhetoric”.

Downing Street kept cool today, saying the UK’s bond yields underlined how credible the UK’s economic plan is. By contrast, France earlier this month became one of 15 eurozone members to be put on negative watch by credit ratings agency Standard & Poor’s.

At last week’s European summit in Brussels, French President Nicolas Sarkozy reportedly described David Cameron as “an obstinate kid” for refusing to sign Britain up to a new European treaty – a fiscal pact on countries’ debts and deficits.

But today it emerged the UK will be “back in the room” when the other 26 EU countries meet next week to discuss a fiscal pact – although it will not have a vote.

David Cameron agreed to go attend in a phone call this morning with Germany’s Chancellor Angela Merkel. It is thought he has not yet spoken to President Sarkozy.