France is at risk of losing its AAA status not because of politics, but because of credibility, or lack of it. Noyer attacked the UK’s financial position as being worse than that of France which is true, up to a point. Both countries’s public sector debts are running at about 85pc of GDP but when Britain’s private sector debts are added we’ve got one of the worst debt positions in the world. UK's annual deficit is 8.4pc of GDP this year, falling to 7.6pc next year while the French deficit is 5.7pc and 4.5pc respectively. But France has the biggest debt burden of the top six eurozone nations, while its banks have the biggest exposure to the toxic government debts of the single currency’s worst offenders. France, Italy and Germany need to repay, or refinance, about €519bn (£436bn) of debts by June, according to Bloomberg data. So not only does France have enormous debts to refinance, its banks face huge potential losses from their own holdings of toxic debt which are likely to require bailouts from Paris - rather like the ones we completed in 2008 with RBS and Lloyds. Add to this the fast-descending economic gloom across Europe and no wonder the rating agencies are nervous. However the UK, outside the euro, has a floating currency which in recent years has depreciated by about a quarter versus the dollar to help our exporters cope (although the euro has been weaker in recent weeks). And the UK has control over it's own interest rates, not to mention the austerity measures already implemented while much of Europe is still talking about. Noyer also moaned that Britain had higher inflation than France, highlighting it as another reason to downgrade the UK. England has higher prices, but arguably the one "good" thing about inflation is it helps reduce a nation's debts in real terms. For a central banker, he showing a remarkable degree of economic illiteracy.
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Friday, December 16, 2011
Sarkozy - no credibility
France is at risk of losing its AAA status not because of politics, but because of credibility, or lack of it. Noyer attacked the UK’s financial position as being worse than that of France which is true, up to a point. Both countries’s public sector debts are running at about 85pc of GDP but when Britain’s private sector debts are added we’ve got one of the worst debt positions in the world. UK's annual deficit is 8.4pc of GDP this year, falling to 7.6pc next year while the French deficit is 5.7pc and 4.5pc respectively. But France has the biggest debt burden of the top six eurozone nations, while its banks have the biggest exposure to the toxic government debts of the single currency’s worst offenders. France, Italy and Germany need to repay, or refinance, about €519bn (£436bn) of debts by June, according to Bloomberg data. So not only does France have enormous debts to refinance, its banks face huge potential losses from their own holdings of toxic debt which are likely to require bailouts from Paris - rather like the ones we completed in 2008 with RBS and Lloyds. Add to this the fast-descending economic gloom across Europe and no wonder the rating agencies are nervous. However the UK, outside the euro, has a floating currency which in recent years has depreciated by about a quarter versus the dollar to help our exporters cope (although the euro has been weaker in recent weeks). And the UK has control over it's own interest rates, not to mention the austerity measures already implemented while much of Europe is still talking about. Noyer also moaned that Britain had higher inflation than France, highlighting it as another reason to downgrade the UK. England has higher prices, but arguably the one "good" thing about inflation is it helps reduce a nation's debts in real terms. For a central banker, he showing a remarkable degree of economic illiteracy.
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A majority of French people are opposed to the recently agreed EU plans for a fiscal compact treaty, with opposition Socialist presidential candidate Francois Hollande calling for a renegotiation of the text.
Some 52 percent of French people oppose the proposed fiscal compact, according to a poll by BVA and reported in the domestic regional press, while 45 percent back the plan.
Opposition and support for the fiscal compact in the country appears to be cleanly split along right-left lines, unlike in a number of other countries, where resistance to the accord is bubbling up from a variety of ideological quarters.
Some eight out of 10 left-wing voters back Socialist candidate Hollande’s aim to renegotiate the text if elected, while eight out of 10 conservative voters oppose the idea.
And 55 percent of managers back the text while just 36 percent of workers approve.
The poll comes as the discourse over the eurozone debt crisis response is hardening ahead of elections in 2012.
On Monday (12 December), Hollande announced that he would renegotiate the document
Speaking at the State Department in Washington, Lagarde said: "There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating.
"It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking some action."
Lagarde said that the scale of the eurozone crisis, and its implications for other countries, meant that Europe's governments could not tackle it alone. "It is going to require efforts, it is going to require adjustment, and clearly it is going to have to start from the core of the crisis at the moment, which is obviously the European countries and in particular the countries of the eurozone," Lagarde said.
As Lagarde called for unity, there were strong attacks on Britain from both the French finance minister, Francois Baroin, and the governor of the French central bank, Christian Noyer, in what appeared to be a concerted attempt by Paris to escalate a war of words with London in the wake of Britain's decision to veto a new EU treaty.
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