December 16, 2011
As Tension Rises in France, Harsh Talk With Britain
By LIZ ALDERMAN
PARIS — To the long list of victims emerging from Europe’s financial crisis, make room for a new one: the “Entente Cordiale” between Britain and France.
A week after the British prime minister, David Cameron, refused to sign a Europe-wide pact that leaders had hoped would stabilize the euro zone, a cross-Channel spat has escalated into a full-blown war of words. Fears in Paris have reached a fever pitch over the prospect that France is about to lose its triple-A credit rating, the highest available.
President Nicolas Sarkozy started preparing the country this week for the imminent loss of its gilt-edged status, though Fitch Ratings on Friday affirmed France’s top credit rating while changing its outlook to negative.
A downgrade by Standard & Poor’s Ratings Services, which has put France on review with a negative outlook, became more likely last week after a summit meeting of European Union leaders was widely declared a flop.
But in the last two days, French officials have unleashed a diatribe suggesting that Britain, not France, is far more deserving of a downgrade.
“At this point, one would prefer to be French than British on the economic level,” the French finance minister, François Baroin, declared Friday.
The ruckus comes as Mr. Sarkozy prepares for a tense re-election campaign heading into what promises to be a gloomy year economically for the country and much of the rest of Europe.
Troubled by the crisis in the euro zone, France is probably already in a recession, the government and the central bank warned this week, with a decline in economic activity expected to continue at least through March. Business and consumer sentiment have deteriorated, and unemployment is stuck at just below 10 percent.
Paris has embraced two austerity plans since the summer in a bid to reduce the country’s chronic budget deficit and meet the demands from Berlin to set an example for the rest of Europe to follow. Officials say those steps are also necessary to prevent France’s international borrowing costs from rising to unhealthy levels because of investors’ concern that France is losing the capacity to foot a growing bill from the euro zone crisis.
The verbal onslaught seemed aimed at deflecting attention from those problems. Within hours, headlines blared from British news Web sites taking exception to the perceived French snub.
“The gall of Gaul!” read The Mail Online. An article in The Guardian accused French politicians of descending “to the level of the school playground.”
Both countries are in poor economic shape. While the French are not suffering anything like the distress being felt in Greece, Portugal and Ireland — which cannot pay their bills without help from the European Union and the International Monetary Fund — the French government is not immune to speculators who see its rising debt levels as making it vulnerable to attacks in the bond market.
France’s debt as a percentage of gross domestic product was 82.3 percent in 2010, a figure that is expected to rise in the coming years even after it tightens its belt. Britain’s debt was 75 percent of its G.D.P. and also rising fast despite a stringent austerity program that is, at least for now, only adding to the country’s economic woes.
In France, the budget deficit was 7.1 percent of G.D.P. last year. Mr. Sarkozy has pledged to reduce it to 3 percent by 2013, partly through higher taxes, but he has been reluctant to spell out which social programs may have to be cut as well, out of fear of further alienating already disenchanted voters.
A looming recession is making that fiscal dilemma even worse by adding to social costs and reducing tax revenue.
“It is very bad news for people, because it means the unemployment rate will increase as more firms will have to fire people or go bankrupt in the private sector,” said Jean-Paul Fitoussi, a professor of economics at L’Institut d’Études Politiques in Paris. “It’s also bad news for politicians. They are in a kind of a trap because they have to say to the people that there is nothing they can do for them.”
As he walked to his job in an affluent suburb of Paris, Steve Kamguea, 22, an entry-level banker at AlterValor Finances, said he saw little hope for a revival of economic growth in France.
“With the problems in the euro zone hitting us, people are anxious about what will happen in the future,” Mr. Kamguea said. “Purchasing power is already low, and it’s hard to get by,” he added, shielding his face from a driving cold rain. “Many people don’t know if they can find a job, and if they do, how much it will pay.”
The prospect of losing France’s sterling credit rating may throw more fuel on the fire. Both Standard & Poor’s and Moody’s said they would review all European Union countries for a possible downgrade soon after last week’s summit meeting.
On Friday, Fitch left France off a list of six euro zone countries that it warned could be downgraded soon. The agency named Belgium, Cyprus, Ireland, Italy, Spain and Slovenia.
But Fitch, in a separate statement reaffirming France’s AAA rating, revised its outlook on long-term debt to negative from stable. It suggested that France could lose the top rating over the next two years, saying it was the most exposed of other euro countries to a further intensification of the crisis.
As for last week’s euro crisis summit and actions by the European Central Bank to ease a banking credit crunch, Fitch said the commitments “were not sufficient to put in place a fully credible financial firewall to prevent a self-fulfilling liquidity and even solvency crisis for some non-AAA euro area sovereigns. In the absence of a comprehensive solution, the euro zone crisis will persist and likely be punctuated by episodes of severe financial market volatility.”
In the six-country announcement, Fitch was even more severe, concluding that after the summit meeting, “a ‘comprehensive solution’ to the euro zone crisis was technically and politically beyond reach.”
Also Friday, Moody’s Investors Service downgraded Belgium by two notches to Aa3 with a negative outlook.
Because a potential credit downgrade has been widely telegraphed, most French officials do not expect significant damage. Many cite the one-notch downgrade S.& P. made to the United States’ AAA credit rating this summer, saying the move did not stop investors from flocking to United States Treasury securities.
In Europe, “if everyone is downgraded at the same time, it may be a nonevent,” said one high-ranking French finance official, who spoke on condition of anonymity. In any case, the official added, French debt, and that of most other euro zone governments, is already trading in financial markets as if the downgrade had already happened.
A senior French banking official insisted that a downgrade would not affect the French banking industry nearly as much as new regulatory requirements that banks raise tens of billions of euros in new capital to help guard against a further worsening of the debt crisis in the euro zone.
Some banks in France, Italy, Spain and even Germany have already started to pull back on lending to consumers and businesses, analysts say. A number of European banks are planning to sell assets to raise fresh capital.
Those issues are probably far more worrisome than the prospect of a credit downgrade, but that has not stopped the rating question from infiltrating the national psyche and dominating discussions of public affairs. It has even hit the streets. “France will lose its Triple-A,” lamented a recent scrawl of graffiti on the side of a commercial building in the chic Marais quarter.
Despite the growing nervousness, the high-ranking French official insisted Friday that France was not calling on the ratings agencies to actually pull down Britain’s own triple-A rating. “That would be stupid,” he said.
The message, the official added, was more to tell the ratings agencies that there was “no ground to downgrade France, but if a downgrade does happen, there are other countries that should be in the same spot.”
That did little to placate Britain’s political establishment. Nick Clegg, Britain’s deputy prime minister, telephoned Prime Minister François Fillon of France on Friday to object to France’s criticism.
Mr. Fillon “made clear it had not been his intention to call into question the U.K.’s rating but to highlight that ratings agencies appeared more focused on economic governance than deficit levels,” Mr. Clegg’s office said.
Mr. Clegg accepted the explanation but had a blunt reply of his own. “Recent remarks from members of the French government about the U.K. economy were simply unacceptable,” Mr. Clegg told Mr. Fillon, according to the statement. “Steps should be taken to calm the rhetoric.”
Monday, December 19, 2011
Thursday, December 08, 2011
Bring the Iron Lady Back 2011 12 7 nytimes
December 7, 2011
Bring the Iron Lady Back
By RICHARD VINEN
London
MARGARET THATCHER has long been reviled by the British left, so much so that the singer Elvis Costello once fantasized about stomping on her grave in his 1989 song “Tramp the Dirt Down.” But Mrs. Thatcher achieved more than any other British peacetime prime minister of the 20th century. It is rumored that, when she dies, she will receive a state funeral — an honor rarely accorded to anyone except monarchs. There are also plans for a public celebration.
Her life is the inspiration for a new movie that opens later this month, starring Meryl Streep as “The Iron Lady.” It chronicles Mrs. Thatcher’s divisive policies as prime minister as she led Britain through the economic doldrums of the 1980s. It was a time when the country faced financial ruin and politicians were compelled to make hard choices.
Mrs. Thatcher was a tough, adversarial leader. She was never liked, even by those who supported her policies, and she was hated by those who opposed her.
Yet her political style may be just what Britain needs right now. The country is in the midst of an economic crisis that will force the government to make difficult, unpopular decisions. And that is what Mrs. Thatcher did so well. Facing long-term economic decline and the brooding menace of the Soviet Union, she broke the trade unions, sold off nationalized industries and helped imbue British capitalists with a confidence that they had not felt since the death of Queen Victoria.
She was at her best when the odds seemed against her or when she had clear enemies. In 1982, she sent an armada to fight the Argentines in the Falkland Islands. And in 1984-85, she held out against a strike by the National Union of Mineworkers, which had been powerful enough to bring down a government 10 years before.
Although Mrs. Thatcher has become a respected symbol of statesmanship outside Britain, she remains a reminder of social division within it. In 2008, the future foreign secretary, William Hague, sought to reassure American officials that he and David Cameron, soon-to-be prime minister, were “Thatcher’s children.” When his comment leaked, the Labour opposition seized upon it, keen to circulate the quote in the hopes that it would stir up old anti-Thatcher feelings. And despite being in power today, Conservative leaders still worry that they are associated with the bitterness of the Thatcher years. They speak of changing their image as “the nasty party” and the need to “detoxify the brand.”
One reason British politicians feel uncomfortable with Thatcherism is that Britain has been relatively prosperous in the last two decades, at least in part because of things the Thatcher government did: tax cuts, financial-sector deregulation and weaker unions all made Britain a more attractive place to do business.
A new generation of politicians who grew up in an age of prosperity has ceased to think of politics in terms of hard choices and scarce resources; Mr. Cameron belongs to that generation. He was just 12 years old when Mrs. Thatcher came to power in 1979 and he became leader of the Conservative Party in 2005, when the current economic storms seemed almost unimaginable. Even when Mr. Cameron became prime minister last year, the financial crisis still felt, to most of the British electorate, like something short-term and vaguely unreal.
But British politics has lost something with its post-Thatcher embrace of consensus and optimism. Thatcherism was a galvanizing force. It mobilized right-wingers to do things, such as selling off huge state-owned corporations, that many of them would once have considered impossible. It also mobilized the left to develop radical alternatives: during the 1980s, the Labour Party veered toward support for unilateral nuclear disarmament and increased state intervention in the economy.
Unlike today, voters in 1983 faced clear choices. A vote for Thatcher’s Tories was a vote for large-scale privatization; a vote for Labour was a vote for socialism. A Conservative vote meant keeping Britain in the European Economic Community; a Labour vote meant withdrawal. A Tory vote meant stationing American cruise missiles in Britain; a Labour vote meant that they would be stopped.
There are no longer such clear-cut choices. Explicit talk of class interests and inequality have been replaced by a vaguer and less divisive language of “fairness” and “equal opportunity.”
The major political parties look remarkably similar today. All are led by clean-cut 40-somethings who blend social liberalism (support for same-sex marriage and opposition to the death penalty) with acceptance of the free market. Indeed, the Conservatives now find themselves governing with strange bedfellows, in a coalition with the small Liberal Democrat Party, whose president recently described Thatcherism as “organized wickedness.” Mrs. Thatcher hated coalitions. She most likely would have preferred to lose an election than to govern without an outright parliamentary majority.
Unlike Mr. Cameron, Mrs. Thatcher came to power at a time when people felt desperate. This desperation, and the sense that she might be the last chance to restore Britain’s fortunes, accounted for much of her success.
Thatcherism was not an alien invasion. It reflected a consensus by many members of the British establishment that things could not go on as they were. This is why so many supported Mrs. Thatcher’s policies, even when they disliked her personally.
Mr. Cameron is certainly a more likable figure than Mrs. Thatcher, but likability may not be enough when the British people realize that their current predicament — requiring government spending cuts at a time of rising unemployment and financial chaos in Europe — is actually worse than the crisis when Mrs. Thatcher came to power in 1979.
In these circumstances, it will take a bracing dose of Thatcherite ideological confrontation to revive British politics.
Richard Vinen, a professor of history at King’s College, London, is the author of “Thatcher’s Britain: The Politics and Social Upheaval of the 1980s.”
Bring the Iron Lady Back
By RICHARD VINEN
London
MARGARET THATCHER has long been reviled by the British left, so much so that the singer Elvis Costello once fantasized about stomping on her grave in his 1989 song “Tramp the Dirt Down.” But Mrs. Thatcher achieved more than any other British peacetime prime minister of the 20th century. It is rumored that, when she dies, she will receive a state funeral — an honor rarely accorded to anyone except monarchs. There are also plans for a public celebration.
Her life is the inspiration for a new movie that opens later this month, starring Meryl Streep as “The Iron Lady.” It chronicles Mrs. Thatcher’s divisive policies as prime minister as she led Britain through the economic doldrums of the 1980s. It was a time when the country faced financial ruin and politicians were compelled to make hard choices.
Mrs. Thatcher was a tough, adversarial leader. She was never liked, even by those who supported her policies, and she was hated by those who opposed her.
Yet her political style may be just what Britain needs right now. The country is in the midst of an economic crisis that will force the government to make difficult, unpopular decisions. And that is what Mrs. Thatcher did so well. Facing long-term economic decline and the brooding menace of the Soviet Union, she broke the trade unions, sold off nationalized industries and helped imbue British capitalists with a confidence that they had not felt since the death of Queen Victoria.
She was at her best when the odds seemed against her or when she had clear enemies. In 1982, she sent an armada to fight the Argentines in the Falkland Islands. And in 1984-85, she held out against a strike by the National Union of Mineworkers, which had been powerful enough to bring down a government 10 years before.
Although Mrs. Thatcher has become a respected symbol of statesmanship outside Britain, she remains a reminder of social division within it. In 2008, the future foreign secretary, William Hague, sought to reassure American officials that he and David Cameron, soon-to-be prime minister, were “Thatcher’s children.” When his comment leaked, the Labour opposition seized upon it, keen to circulate the quote in the hopes that it would stir up old anti-Thatcher feelings. And despite being in power today, Conservative leaders still worry that they are associated with the bitterness of the Thatcher years. They speak of changing their image as “the nasty party” and the need to “detoxify the brand.”
One reason British politicians feel uncomfortable with Thatcherism is that Britain has been relatively prosperous in the last two decades, at least in part because of things the Thatcher government did: tax cuts, financial-sector deregulation and weaker unions all made Britain a more attractive place to do business.
A new generation of politicians who grew up in an age of prosperity has ceased to think of politics in terms of hard choices and scarce resources; Mr. Cameron belongs to that generation. He was just 12 years old when Mrs. Thatcher came to power in 1979 and he became leader of the Conservative Party in 2005, when the current economic storms seemed almost unimaginable. Even when Mr. Cameron became prime minister last year, the financial crisis still felt, to most of the British electorate, like something short-term and vaguely unreal.
But British politics has lost something with its post-Thatcher embrace of consensus and optimism. Thatcherism was a galvanizing force. It mobilized right-wingers to do things, such as selling off huge state-owned corporations, that many of them would once have considered impossible. It also mobilized the left to develop radical alternatives: during the 1980s, the Labour Party veered toward support for unilateral nuclear disarmament and increased state intervention in the economy.
Unlike today, voters in 1983 faced clear choices. A vote for Thatcher’s Tories was a vote for large-scale privatization; a vote for Labour was a vote for socialism. A Conservative vote meant keeping Britain in the European Economic Community; a Labour vote meant withdrawal. A Tory vote meant stationing American cruise missiles in Britain; a Labour vote meant that they would be stopped.
There are no longer such clear-cut choices. Explicit talk of class interests and inequality have been replaced by a vaguer and less divisive language of “fairness” and “equal opportunity.”
The major political parties look remarkably similar today. All are led by clean-cut 40-somethings who blend social liberalism (support for same-sex marriage and opposition to the death penalty) with acceptance of the free market. Indeed, the Conservatives now find themselves governing with strange bedfellows, in a coalition with the small Liberal Democrat Party, whose president recently described Thatcherism as “organized wickedness.” Mrs. Thatcher hated coalitions. She most likely would have preferred to lose an election than to govern without an outright parliamentary majority.
Unlike Mr. Cameron, Mrs. Thatcher came to power at a time when people felt desperate. This desperation, and the sense that she might be the last chance to restore Britain’s fortunes, accounted for much of her success.
Thatcherism was not an alien invasion. It reflected a consensus by many members of the British establishment that things could not go on as they were. This is why so many supported Mrs. Thatcher’s policies, even when they disliked her personally.
Mr. Cameron is certainly a more likable figure than Mrs. Thatcher, but likability may not be enough when the British people realize that their current predicament — requiring government spending cuts at a time of rising unemployment and financial chaos in Europe — is actually worse than the crisis when Mrs. Thatcher came to power in 1979.
In these circumstances, it will take a bracing dose of Thatcherite ideological confrontation to revive British politics.
Richard Vinen, a professor of history at King’s College, London, is the author of “Thatcher’s Britain: The Politics and Social Upheaval of the 1980s.”
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