“...one prefers to be French than British at the moment on the economic level” – François Baroin, French economy minister
“ ... they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and where credit is slumping” – Christian Noyer, governor, Bank of France
With reports that France's AAA credit rating will be cut by Standard & Poor's before Christmas, the eurocrisis is not going away or even taking time off for the holidays. French protestations aside, if you have a choice, you don't want to be "trapped" in the Eurozone--better the safe havens of the UK, Sweden, Switzerland, Norway--
UK will fare better in this Anglo-French spat - FT.com: ". . . . The real difference between France and the UK is simply that the UK is not trapped. Britain is a sovereign country. France is economically a sub-sovereign zone. That is the simple reason why the eurozone needs a eurobond and a lender of last resort function in the system. With those functions in place, policy errors are less catastrophic.Mr Baroin is therefore quite wrong. You do not want to be French, German or Italian if you have a choice. A rating downgrade for France and the rest of the eurozone is thus logical and deserved."
Or as the Nobel laureate Paul Krugman has explained (substitute France for Italy below):
". . . The answer lies in the concept of original sin. . . the economics kind — the long-standing notion that developing countries were especially vulnerable to financial crises because they borrowed in foreign currency. (Yes, the linked paper actually raises some distinctions between currency mismatch and original sin; never mind for now). The key point is that by joining the euro, Italy took a bite of the apple — it converted its advanced-country status, as a nation issuing debt in its own currency, into original sin, with debts in someone else’s currency (Europe’s in principle, Germany’s in practice). That is the root of its new vulnerability."
When the facts change, I change my mind. What do you do? -- John Maynard Keynes
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