Britain has retaliated in the diplomatic war of words with France over the relative worthiness of each countries triple-A rating in the fallout of last week’s European summit in Brussels.
The UK Prime Minister, David Cameron, used Britain’s veto to block the proposed treaty that aimed to set budget levels and impose automatic penalties on countries that exceeded them. The UK’s main opposition came against a proposed financial transactions tax that would penalise the city of London and the UK more than other European financial centres.
On Thursday, the head of the Bank of France, Christian Noyer, said that Britain has “more debt, higher inflation and less growth” than France. France is concerned that it could have its triple-A credit rating, something that the French Prime Minister, Nicolas Sarkozy, regards as sacrosanct.
Yesterday, Francois Baroin, the French finance minister added to the controversy by saying that “The economic situation in Britain today is very worrying, and you’d rather be French than British in economic terms.”
The UK’s budget deficit is just over nine per cent of GDP, whilst France’s is just below six per cent. However, experts predict that the recession in the eurozone, which is expected between the final quarter of 2011 and the first two quarters of 2012 will be deeper in the eurozone than in the UK.
The comments by Mr Noyer and Mr Baroin were seen by the British government as an attack and led to Nick Clegg to tell Francois Fillon, the French prime minister that the comments were “simply unacceptable”. Mr Fillion had earlier added his own criticism of the UK’s economic situation by saying that “our British friends who are even more indebted than us.”
According to reports of the telephone conversation, Mr Fillion backtracked and said that the comments by himself and other senior financial figures in France were aimed at illustrating the inconsistency of the ratings agencies and were not designed to be a direct attack or bring the UK’s triple-A rating into question.
Robert Zoellick from the World Bank said that he was “deeply troubled to see some of the commentary going across the English Channel”.
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