The claim

“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.”

Francois Baroin, France’s finance minister, 15 December 2011

The background

La France is staring down the barrel of a credit downgrade, and is showing very little grace under fire.

France’s finance minister Francois Baroin and Christian Noyer, the head of the Bank of France, have blasted credit agencies for reassessing their AAA credit rating, telling them to look across the Channel at us instead.

“One would rather be French than British at the moment,” Baroin said.

FactCheck knows the situation is bleak, but does Britain deserve the cold shoulder from France or should we issue them a Gallic shrug?

The analysis

Baroin picked off four specific economic ailments:


We are borrowing considerably more money than France this year. The UK is currently borrowing 8.8 per cent of gross domestic product (GDP or national income), according to the International Monetary Fund. This is projected to dip to 7.9 per cent in 2012. France meanwhile is running a deficit of 5.9 per cent, which the IMF expects will fall to 4.4 per cent next year.


The UK’s debt level is currently slightly lower than in France; 82.4 per cent of GDP versus 85.4 per cent across the Channel.  But it is actually forecast to overtake France by 2013, rising to 92.5 per cent, while the French are expected to grapple with a slightly lesser debt pile of 91.7 per cent.


The IMF’s Economic Outlook last month put the average CPI inflation in the Euro area at 2.5 per cent this year. In the UK, CPI is 4.5 per cent, much higher than France’s 2.1 per cent. And while the IMF expects inflation in the UK to drop to 2.5 per cent next year, that’s still higher than their prediction of 1.4 per cent for France.


Nil points to Baroin on this one. Last month, the Organisation for Economic Co-operation and Development (OECD) cut its forecasts for UK growth during 2012 as a whole to just +0.5 per cent, from +2 per cent before.

However this puts us ahead of the French – who are expected to see 0.3 per cent growth in 2012. And it sets us ahead of the predicted eurozone average – which the OECD predicted would expand by a tiny 0.2 per cent in 2012, after beginning the year with a recession. In a bleak warning, the OECD outlined a worst-case scenario of the eurozone economy shrinking by 2.1 per cent in 2012, and a further 3.7 per cent in 2013.

The verdict

It’s 3-1 to France – so Monsieur Baroin is right, to an extent.

But France’s finance minister didn’t stop there. “They should start downgrading Britain,” Baroin argued. And even the head of the Banque de France, Christian Noyer, said we should lose our AAA rating before France does.

Is that fair? Downing Street doesn’t think so – Number 10 says international bond markets have more confidence in Britain than France.

And they’re right – if you look at the yield on 10 year government bonds, it is currently 2.1 per cent. By comparison, France’s 10 year government bonds yield stands at 3 per cent right now. This means the cost of their debt is 50 per cent more than ours.

What’s more, Britain’s banks clearly don’t think France is worth the risk – Bank of England figures out today show they pulled £18.9bn out of French bonds between July and September, and invested in Germany and the Netherlands instead.

Or you could look at the cost of insuring the UK against going bust – through credit default swaps (CDS) spreads – which currently show we’re a less risky bet than France.

Why are we a better bet? We have our own currency that can fluctuate up and down, and we set our own monetary policy.

And we won’t have to stump up the cash to bail out Europe – which could push up taxes in France and lessen their ability to pay off their debt.

By Emma Thelwell