France fires broadside at British economy – is it ‘Twitterloo’?
It’s Twitterloo! The Banque de France is throwing away the book on monetary diplomacy, and openly lashing out at Britain’s economic record in remarkable terms today.
A few weeks ago I reported on the growing discontent withing Europe’s central banks at the unwanted advice to print money from the “English Patient”.
Today, the Banque de France, France’s central bank, went a step further, clearly translating into English and tweeting out pointed criticisms of the UK economy in the name of its governor.
“@banquedefrance: Noyer: The UK has a bigger deficit, as much debt, more inflation, weaker growth, than France.”
“@banquedefrance: Noyer: Bank lending “is collapsing” in the UK”
Of course the context here is the increasing likelihood that Papa Noel is about to deliver the unwanted Christmas present of a AA credit rating.
I can’t find the speech, but the tweets seem to be a defence of France’s credit rating, particularly in relation to the worse economic fundamentals in Britain.
Indeed when I saw Noyer in October he suggested that the eurozone was being “punished” for it’s “virtue” in not engaging in a UK-style “massive monetisation” of our debts. Certainly Standard & Poor’s now openly includes the prospect of having a friendly central bank liquidising your debts as a ratings plus point.
So who started this low level economic jousting? As I pointed out last month, European monetary officials are fed up with lectures from Britain.
The not-so-subtle megaphone diplomacy wielded by the Chancellor, PM, and US Treasury Secretary, has, if anything, made it less likely, not more likely that the ECB will act.
And Sir Mervyn King seemed to support the ECB position when asked about this last month. The ECB jealously guards its independence. The Chancellor’s candid finger-poke at French banks did not go down too well either.
The “veto” has added to the bemusement. Osborne and Cameron have been telling the EU to unite fiscally for half a year. Few understand why they then popped up with an obscure protocol in the early hours.
How does this battle end? The eurozone bankers genuinely believe their economic fundamentals are better than those of the US and UK. That they are taking the tougher strategy of not printing so far. And that in two years’ time, they’ll be proved right. Mon dieu!
Update at 9pm:
I should reiterate that this is extraordinary stuff to hear from a Central Bank Governor, but it might just reflect maths. Here is the actual quote, from Governor Noyer to a local French newspaper La Telegramme, that was purposefully put out in English in chunks on Twitter.
“A downgrade [for France] doesn’t seem justified to me when you look at the economic fundamentals. Or if it is, they should start by downgrading the UK, which has a bigger deficit, as much debt, more inflation, weaker growth and where bank lending is collapsing,” he told Le Telegramme newspaper.
The full interview is here, in French. And it also appears that the French prime minister has got in on the act, according to the WSJ, with France’s prime minister saying: “Our British friends have a higher deficit and more debt, and I would say that the ratings agencies have not yet noted that.”
Are the French right? In a word, yes. Our raw fiscal numbers, our inflation, the real size of the economy in relation to its size of the crisis compare unfavourably. Here are the numbers on debts and deficits from Britain’s own OBR assessment, page 168:
UK deficit
2011: 8.8 per cent; 2012: 7.9 per cent; 2013: 6.5 per cent
France deficit
2011: 5.8 per cent, 2012: 5.3 per cent, 2013: 5.1 per cent
France’s borrowing is estimated to be lower this year and in the next two years.
And what about our total national debt?
UK
2011: 82.4 per cent, 2012: 88.8 per cent, 2013: 92.5 per cent
France
2011: 85.4 per cent, 2012: 89.2 per cent, 2013: 91.7 per cent
It’s very close. This year, French debts are slightly higher than ours but the UK does end up with higher national debts.
Reuters have put this handy scadenfreude-killing compendium of the UK v France v Germany together on 8 indicators.
So to some degree you can understand the French horreur. However they’ve clearly missed S&P’s numerous announcements that their ratings methodology is no longer about just raw fiscal numbers, but also about political economy, and crucially the behaviour of central banks. The ECB’s stern hand is a factor, and S&P made that clear. Does that make sense? Perhaps not.
Big picture: France and the unpopular Sarkozy administration is terrified about the possible loss of its AAA rating. The French President’s rival for the Elysee, Francois Hollande, is already making political capital out of it. On a statistical basis they do have a point about Britain. But airing this stuff does not seem like cricket, or boules for that matter. Though they may say the same thing about unwanted advice from Cameron and Osborne.
PS: French satirical magazine Charlie Hebdo’s take on “WHY do we want the English in Europe?” featuring its view of typical British couple.
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