France lose its credit rating? It should be the UK! blasts head of central bank amid rising tensions between London and Paris



Attack: Christian Noyer said that markets should start downgrading Britain because of the decision to veto a new European treaty

Relations between Britain and France plunged to a new low yesterday when the head of the French central bank called for the UK’s gold-plated credit rating to be downgraded.

The inflammatory attack on the British economy by Christian Noyer was quickly branded evidence of a cross channel ‘Entente Discordiale’ over the future of the euro.

Mr Noyer, who also sits on the board of the European Central Bank, said the markets should ‘start by downgrading Britain’ – a move that would see interest rates rise, costing mortgage payers thousands of pounds a year.

The row erupted amid signs that the deal designed to save the euro from collapse, thrashed out by France and Germany in Brussels last week, is imploding.

Both the Czech government and Hungary yesterday said they would follow David Cameron and refuse to sign the new treaty unless Germans demands to harmonise Eurozone tax rates are dropped.

Mr Noyer lashed out at Britain after credit rating agencies warned that France’ s AAA credit rating could be downgraded amid fears that the Eurozone have failed to do enough to prop up bankrupt economies in the single currency or overstretched Eurozone banks.

In an interview with Le Telegramme newspaper, he said: ‘A downgrade does not appear to me to be justified when considering economic fundamentals. ‘Otherwise, they should start by downgrading Britain, which has more deficits, as much debt, more inflation, less growth than us and where credit is slumping.’

Mr Noyer’s attack came a day after French President Nicolas Sarkozy accused David Cameron of behaving like an ‘obstinate kid’ for vetoing an EU-wide deal last week. He has previously told the Prime Minister to ‘shut up’ about the single currency’s problems.

His attack ignored the fundamental fact that the British economy is regarded as far sounder than that of France.

The price the UK pays on government debt is much lower since the coalition has shown that it is serious about tackling Britain’s deficit and Britain is not in the crisis-ridden Euro.

Yesterday the UK’s bond rate – the price paid on government debt was 2.14 per cent – nearly a whole point below that of France at 3.11 per cent.

David Cameron has told Tory MPs he has been in close contact with counterparts in other member states and insisted it was 'not one against 26'

The Treasury has warned that even a 1 per cent rise in interest rates – the likely fate of a country whose credit rating was hit – would add £10billion to mortgage bills every year and see the mortgage bill of the average family rise by £1,000 a year.

The Prime Minister’s official spokesman said: ‘All I can say is that we have put in place a credible plan for dealing with our deficit, and the credibility of that plan can be seen in what happened to bond yields in this country.’

The Treasury also hit out at Mr Noyer’s claim, pointing to the UK’s low bond yields. A source said ‘the markets clearly don’t agree with Noyer’.

Downing Street and Treasury officials believe the French attacks on Britain are designed to distract attention from the Eurozone’s failure to put in place the ‘Big Bazooka’ rescue fund to prop up the single currency – or take concrete steps to help re-capitalise EU banks.

Over the last few days Mr Cameron has sought to drum up support for Britain’s position with his counterparts in non-euro states Denmark, Sweden and the Czech Republic, all of whom are said to have concerns about the compact, as well as with Enda Kenny of eurozone member Ireland, who has warned he may have to put it to a referendum.

Yesterday, both the Czechs and Hungarians revealed they have grave doubts about the deal.

Taking aim: French finance minister Francois Baroin said Britain was now 'marginalised' following an attack by Nicolas Sarkozy who accused David Cameron of acting like a 'kid' on Wednesday



Both countries said they would consult their parliaments before deciding whether to join the 17 eurozone nations in a deal that would subject countries’ tax and budget policies to EU approval.

Czech Prime Minister Petr Necas said. ‘But we are convinced that tax harmonisation would not mean anything good for us.’



Hungarian Prime Minister Viktor Orban said: ‘The only kind of cooperation we can have with the eurozone is one which does not damage Hungary’s competitiveness.’

It also emerged yesterday that plans to funnel another 200 billion euros -- £120 billion – to the International Monetary Fund to help struggling Eurozone countries was yet another phantom rescue effort.

EU officials admitted that the plan was not backed up with real money and that the 200 billion euro sum was simply ‘intended to reassure the markets but had no substance behind it’.

Czech Prime Minister Petr Necas, left, is welcomed by his Hungarian counterpart Viktor Orban. Both are said to have grave doubts about a new deal

Britain has refused to pay the £30 billion envisaged under the plan because the Eurozone has still failed to

Bill Cash, chairman of the European Scrutiny Committee, said other European countries were right to resist attempts to create a fiscal union: ‘The current proposals would impose on countries decisions which belong to their own electors.

‘No amount of economic hegemony will induce some countries to surrender their economic, financial and electoral national autonomy.