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French banker hints at UK downgrade


Nicolas Sarkozy is said to have accused David Cameron of behaving 'like an obstinate kid' (AP)

Nicolas Sarkozy is said to have accused David Cameron of behaving 'like an obstinate kid' (AP)

Nicolas Sarkozy is said to have accused David Cameron of behaving 'like an obstinate kid' (AP)

Tensions between London and Paris have been heightened further after the head of France's central bank suggested that the UK was a candidate for a credit rating downgrade.

France is bracing itself for the potential loss of its coveted AAA rating after two credit agencies last week indicated they were considering marking down countries across the eurozone.

But Banque de France governor Christian Noyer said they should instead be looking at the UK because of the scale of debt and inflation and the poor levels of growth and bank lending on this side of the Channel.

His comments came a day after President Nicolas Sarkozy was quoted as branding David Cameron an "obstinate kid" for refusing to sign up to a treaty to rescue the euro last week.

Mr Noyer told Le Telegramme newspaper that a downgrade for France - which would drive up the interest Paris pays to borrow and make loans in the wider economy more expensive - "doesn't strike me as justified based on 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 added.

Downing Street responded with restraint. Mr Cameron's official spokesman said: "We have put in place a credible plan for dealing with our deficit and the credibility of that plan can be seen in what has happened to bond yields in this country."

The spokesman also played down suggestions that the Prime Minister was seeking to undermine the agreement secured between 26 EU states at last week's summit in Brussels after he used his veto to block a treaty involving all 27.

Cracks have already begun to emerge in the group of 26 after Hungary and the Czech Republic - both outwith the eurozone - said they would not join the new agreement unless plans for tax harmonisation were dropped.

Following a telephone call with European Council President Herman Van Rompuy, Downing Street said Mr Cameron had agreed British officials would take part in the technical discussions on the new treaty. "The Prime Minister reiterated that he wants the new fiscal agreement to succeed, and to find the right way forward that ensures the EU institutions fulfil their role as guardian of the EU treaty on issues such as the single market," a No 10 spokesman said.

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