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France, Britain Fight To Keep AAA Ratings


In Europe, a war of words has broken out between France and Britain on the subject of sovereign ratings. Both countries still have AAA status but there's talk of France being downgraded. Things got ugly when the head of the French Central Bank suggested that ratings agencies might first want to take a look at the UK. Eleanor Beardsley has more.

ELEANOR BEARDSLEY, BYLINE: It all began last Thursday when the French Central Bank head said Britain should be downgraded before France because it has a larger deficit, as much debt, more inflation, and less growth.

UNIDENTIFIED MAN #1: (Speaking French)

BEARDSLEY: Those sentiments were echoed by the French prime minister, then the finance minister, who told radio listeners he'd rather be French than British in today's economy.

UNIDENTIFIED MAN #2: (Speaking French)

BEARDSLEY: British officials responded angrily, in spite of an apology call from Prime Minister Francois Fillon. Even the UK's Europhile Deputy Prime Minister Nick Clegg said he had had enough of the Brit-baiting. Tomasz Michalski, a professor at Paris' HEC business school, says with four months to go until the French presidential election, the attack was deliberate.

TOMASZ MICHALSKI: Sarkozy doesn't want to lose the Triple-A rating, but if he has to lose it, he would prefer that some others countries would be downgraded at the same time. So if France is actually the only country that is downgraded, this is going to be a very bad punch against President Nicolas Sarkozy.

BEARDSLEY: Because it'll be his crisis and his crisis alone. Michalski says the French and British economies are both in bad shape but that the Brits have one distinct advantage.

MICHALSKI: The U.K. can use freely monetary policy to help its economy.

BEARDSLEY: Michalski says the Bank of England can do what the U.S. Federal Reserve has done - print money, a practice known as quantitative easing, which stimulates an economy and eases the government's debt burden. France doesn't have that option because the European Central Bank has no such authority.


BEARDSLEY: With angry words now flying across the English Channel, it's hard to imagine this scene three months ago when Nicolas Sarkozy and British Prime Minister David Cameron walked through the streets of Tripoli in triumph together.

PRIME MINISTER DAVID CAMERON: Your city was an inspiration to the world.

PRESIDENT NICOLAS SARKOZY: (Foreign language spoken)

BEARDSLEY: The Franco-British alliance in the skies over Libya brought down strongman Moammar Gadhafi. But the bonhomie didn't last long. When the two men met at the Brussels summit two weeks ago, French commentators say they didn't even shake hands. And when Britain refused to sign on to a new European treaty, Sarkozy reportedly referred to Cameron as an obstinate kid.

There's nothing strange at all about the turnabout, says Charles Bremner, longtime Paris correspondent for The Times of London.

CHARLES BREMNER: No amount of diplomacy seems to change the fact that the two countries have a mutual antipathy. They're neighbors who dislike each other but also admire each other. Sort of secretly envious and at the same time feeling very superior. And that comes out every time there's one of these spats, especially on the English side.

BEARDSLEY: Bremner says the Brits are terribly sensitive about what the French say about them, and the latest swipe at their economy has caused great indignation. As one British newspaper put it: the gall of Gaul.

Eleanor Beardsley, NPR News, Paris. Transcript provided by NPR, Copyright NPR.