• François Baroin: UK economic situation 'very worrying'
• Mario Monti's government wins vote over austerity plans
• Miliband accuses Cameron of 'economic vandalism'
Here's a video clip showing exactly what French finance minister François Baroin said about the UK economy today.
The clip suggests that Paris is still smarting from recent comments made by British politicians recently. Baroin said that the French government "didn't want to be given any lessons", adding:
We're not giving any, we don't want to receive any either.
As reported earlier, Baroin also said that: "It's true that the economic situation in the UK is very worrying.... from an economic standpoint we prefer being French than British."
More European economic gloom this lunchtime -- this time from Ireland, where the economy has just suffered its fastest decline in two years.
My colleague Lisa O'Carroll has the details:
Central Statistics Office figures show a sharp quarterly fall of 1.9% in gross domestic product during the three months between July and September. This fell significantly short of expectations of a 0.5% drop for the quarter
The fall comes despite continued growth in exports and reflects the lack of growth in the domestic economy depressed by the lack of consumer spending and cutbacks in government expenditure as a result of last year's austerity budget.
Gross national product, which excludes the profits generated by multi-nationals was down by 2.2%.
The CSO said there had been a 20% fall in investment compared with the previous quarter, figures which can be heavily influenced by the purchase of valuable aircraft.
"Overall these figures again highlight the two-speed nature of the Irish economy with domestic demand still very weak and exports the only real shining light," said Alan McQuaid, chief economist at Dublin based Bloxham stockbrokers.
Bloxham has now downgraded its overall forecast for the year. Yesterday it was predicting GDP growth of 1.1% for both 2011. Today, McQuaid said that even allowing for "the erratic and volatile nature of industrial output" the projections look overly optimistic" and he is now forecasting 0.5% for this year.
Phillip Inman, our economics correspondent, argues that the slump in Irish GNP undermines Irish finance minister Michael Noonan's "confidence trick" - that the Irish people are best served by remaining in the eurozone.
Obviously it is not an unusual stance. It is the same message from every indebted government in the eurozone.
Irish ministers love the popular T-shirt slogans "Ireland isn't Greece" and "Ireland isn't Portugal". The trouble is, Dublin is closer to Lisbon and Athens than Noonan cares to admit.
More here.
In France, the criticism of Britain's economy in recent days is even alarming the right-of-centre Le Figaro, which warned in a headline that "Franco-British relations become even more strained."
Our Paris correspondent, Kim Wilshire, writes that:
French politics descended to the level of the school playground as two cabinet ministers and a senior bank official were reduced to shouting names at Britain from across the Channel.
Having sidelined Britain over a new treaty designed to save the crisis-hit eurozone a week ago, the French launched an ours-is-bigger-than-yours row over the state of each country's economy.
Kim flags up that French prime minister François Fillon also took a pop at the UK during a during a visit to Brazil, saying
Our British friends have a higher deficit and debt [than us] but it seems the ratings agencies have not yet noticed.
Breaking news from Italy -- Mario Monti has won a confidence vote over his government's budget plans, including a €33bn austerity plan.
Monti triumphed by 495 votes to 88.
A second vote will take place tonight, but as we explained earlier, that should now become a formality.
The old urban myth that you're never more than six feet away from a rat has a modern rival -- you're never more than six weeks away from a European summit.
European Voice is reporting today that Herman Van Rompuy is hoping to hold a new summit of the EU's national leaders at the end of January or early February.
The summit will "discuss the text of an inter-governmental treaty designed to boost economic discipline in the eurozone."
According to European Voice:
Van Rompuy has invited all 27 member states to join a working group which will draft the text of the fiscal compact treaty, including the UK even though it is refusing to sign up to the new treaty.
A first draft of the treaty is expected to be ready at the start of next week and the working group should start work next week.
News from Germany -- eurosceptic members of Angela Merkel's coalition have failed in an attempt to unstitch the European rescue plan.
An internal vote among the Free Democrats party defeated attempts by the eurosceptic wing of the party to block the creation of the European Stability Mechanism (ESM).
The result will be a relief to Merkel. The Free Democrats are the junior partner in her coalition -- had the referendum opposed the ESM (the eurozone's future rescue mechanism) it was hard to see how they could remain in government.
The French war of words against the UK in recent days has stirred up quite a bit of unhappiness in the UK.
Christian Noyer's claim yesterday that the UK didn't deserve its AAA rating caused particular disquiet in the corridors of power - with one UK Treasury official hissily telling the Financial Times that "The markets clearly don't agree with Noyer."
Should France end up being downgraded, I fear the news may be greeted with little sympathy in 'Perfidious Albion'.
Conservative MP Douglas Carswell, though, has warned against being too smug about France's predicament. He blogged this morning that Britain still has a problem with debt (one of Noyer's arguments), and isn't generating the economic growth needed to deal with it.
Here's a flavour:
Our debt reduction strategy isn't cutting debt. Our growth strategy has produced no growth. Indeed, our debts are no increasing faster than our GDP. Sound familiar?
Like some of those Eurozone countries, market distortions are allowing us to keep on borrowing long after it became imprudent to do so. In their case it was the fantasy that Greek, Spanish and Italian debt was the same things as German and Finnish debt. In our case, it is the fantasy that this bond bubble will last.
The laws of maths apply in any language. We must not get cocky. Without a change in direction, we are heading for trouble too.
The full blogpost, is is here.
The gap between French and British government debt has narrowed this morning -- following Francois Baroin's claim that:
The economic situation in Britain today is very worrying, and you'd rather be French than British in economic terms.
British readers shouldn't panic, though. Although the yield on 10-year gilts has risen slightly, it is still very low in historic terms at just 2.12%. The French equivalent debt is trading at a yield of 3%.
We've seen more evidence this morning that Europe's economy is staggering towards a recession.
The latest trade data showed that the Eurozone's external trade surplus shrank to just €0.3bn in October, from €2.2bn in September. Alarmingly, exports fell by 1.9% month-on-month and imports contracted by a lesser 0.7%.
Economists warned that the sharper drop in exports shows that European manufacturers are suffering from the global slowdown.
Howard Archer, European economist at IHS Global Insight, said there is now a danger that "net trade will be negative in the fourth quarter, thereby adding to the already high risk that Eurozone GDP will contract."
Conservative MP Bernard Jenkin has defended Britain against the volley of criticism from France over the past few days.
Speaking on the BBC's Today Programme this morning, Jenkin - something of a eurosceptic - said:
The problem France is going to have is if countries like Greece start to fall out of the euro, which virtually everyone now accepts is inevitable, the euro may well start to rise in value and begin to look more and more like the deutschmark, in which case France is going to be in an even less competitive position.
They are paying the price for first of all joining the euro and ballooning their debt with lots of cheap money and now they are in the same position as all the countries in the euro - that they are not really competitive in essentially an extended deutschmark.
Jenkin also admitted that the UK's AAA rating would be vulnerable if the eurozone collapsed. He said:
I don't think there is any guarantee the UK will keep its triple A rating. If the euro goes down and we suffer a decline in economic growth as a consequence, our rating may well be affected. But we do have flexibility, we have our own central bank, we can set our own interest rates.
Over in Italy, Tom Kington reports that Silvio Berlusconi is continuing to stir things up now he's out of office:
Just when you thought Silvio Berlusconi had faded from the scene, he was back yesterday, promising at a press conference his party would back Mario Monti's confidence vote on his austerity budget today, but warning the prime minister's technical government could collapse any day.
The result of the vote of confidence is expected at noon, while a second vote on the actual text of the law will take place in early evening, with the result expected at 7.30pm. The confidence vote is expected to pass, at which point the later vote becomes a formality.
Tom continues:
Berlusconi's dig at Monti was however clearly designed to remind him he depends on the former prime minister's votes in parliament. And Berlusconi's refusal yesterday to criticise the privileges enjoyed by Italy's taxi drivers and chemists suggests it is his party members who are helping Italy's entrenched lobbies fight off Monti's bid to open them up to competition.
Monti knows he must follow up his cuts – designed to reduce Italy's budget deficit -- with such liberalisation measures to spur growth, particularly after employers group Confindustria on Thursday cut its growth forecast for Italy in 2012 to minus 1.6 percent and said the country was already in recession.
Peter O'Flanagan of Clear Currency is unimpressed by France's regular barracking of the UK this week (culminating in finance minister François Baroin's criticism this morning):
David Cameron's veto of a reformed EU Treaty has now clearly turned into a playground spat as French authorities attempt to deflect interest from their pending downgrade from AAA status.
Amid the escalating barrage of criticism of the UK from Paris, there are signs of optimism in the financial markets today. Spanish and Italian government debt has risen in value, pushing down the interest rates (or yield) on the bonds (to 6.7% for Italian 10-year bonds, and 5.2% for Spain).
With stock markets also relaxed (the FTSE 100 is up 36 points at 5437), we could see a calm end to a tense week....
Sacré bleu! France's finance minister has just claimed that it is better to be French than British, when it comes to the economy,
Continuing the war of words that began yesterday when French central bank governor Christian Noyer claimed the UK, rather than France, should lose its AAA rating, François Baroin told the Europe 1 radio station this morning that the economic situation in the UK as "now very worrying", so:
On préfère être français que britannique en ce moment sur le plan économique.
Which roughly translates as:
We'd rather be French than British now, economically.
Entente cordiale is clearly cancelled for Christmas. Downgraded to Entente hostile perhaps?
Baroin was speaking after France's national statistics body INSEE warned that the country is now in a shallow recession. He insisted that:
We will achieve our deficit-reduction targests just as we said.
A week may be a long time in politics, but David Cameron's decision to veto EU treaty changes last Friday continues to reverberate.
In today's Financial Times (registration) Ed Miliband accuses the prime minister of an "act of economic vandalism", and questioned Cameron's claim that he had protected Britain's interests:
He didn't get anything for the City of London, he left the City of London marginalised.
The Labour leader also argued that Cameron "doesn't understand the forces he's unleashed" among his more eurosceptic backbenchers,
He's reaped the whirlwind of the last five years and of his failure to modernise the party on Europe.
Miliband remains unclear over exactly how he would have played his cards during the summit, but insists that Cameron failed the key litmus test -- "the French seem delighted with the outcome".
In the City, shares are expected to open a little higher. That's despite Fitch's decision late last night to downgrade eight of the world's biggest banks, including Barclays (more details in yesterday's blog).
Peter Stanhope of IG Markets explained that:
Equity markets remain relatively upbeat with traders across Asia focusing more on the generally positive data that's continuing to emerge from the world's largest economy.
The Italian parliament is expected to vote on Mario Monti's emergency budget at around 11am GMT (noon local time) with a second vote due tonight. The vote has been called in an attempt by Monti to speed up the implementation of his austerity package, and to reassure the financial markets that he can make the changes he has promised.
It's less than six weeks since Berlusconi's own reign as Italy's prime minister was sunk by another confidence vote. Hopefully today's will be less dramatic.....
The budget should be passed -- as neither Silvio Berlusconi's centre-right PDL party or the centre-left Democratic Party wish to be blamed for inflaming the crisis. But Michael Hewson, market analyst at CMC Markets, believes the vote could still cause volatility in the markets.
Good morning, and welcome to another day of rolling coverage of the eurozone crisis.
Yesterday's warning by Christine Lagarde that the world risks a repeat of the depression of the 1930s continues to reverberate around the financial markets today. It dominates most of the UK front pages today, alongside France's broadside attack on the Britain's AAA credit rating.
It's now eleven days since Standard & Poor's warned it could cut France's credit rating by two notches -- can the Gallic Triple-A last another day? We'll also be watching events in Italy, where Mario Monti's government of technocrats faces a confidence vote over its emergency budget plans.
And two of Europe's top central bankers, Mario Draghi and Mervyn King, will both be speaking at a conference in Rome later today.
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Source: http://www.guardian.co.uk/business/2011/dec/16/debt-crisis-eurozone-depression-italy
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