Focus on France Ian Sparks reports from Paris

EURO-REPORT

FOCUS ON... France

Ian Sparks reports from Paris on the latest spats between the UK and France.

French president Nicolas Sarkozy has come in for sharp criticism both in France and the UK after claiming that “Britain has no industry left.”

The controversial comment – the latest in a series of jibes at the British economy from Paris – sparked widespread anger among newspapers and industry experts in the UK.

But the slur was also branded as ‘totally false’ by the French media and prominent economists, who said it made him look increasingly desperate ahead of the French presidential election in May where polls suggest he will be heavily defeated by his socialist rival Francois Hollande.

The president made the remark as he met journalists to announce a VAT rise of 1.6 per cent, along with a 0.1 per cent tax on financial transactions, both aimed at raising revenue to prop up France’s ailing economy.

It prompted one reporter to remind Mr Sarkozy that Britain had experienced a spike in inflation when it raised its own VAT levels. But the French leader swiftly hit back: “The United Kingdom has no industry any more.”

When pressed on the issue by journalists, Mr Sarkozy was then incapable of saying which British industries had declined and also unable to specify whether he was referring to the UK’s manufacturing base or a recent decline of its service industry.

British newspapers predictably pounced on the comment as another sign of the demise of the Franco-British ‘entente cordiale’, and urged him to ‘check his facts’ over each country’s industrial output.

But even his own revered Le Monde daily newspaper joined the attack on their president for brazenly consigning British industry to the scrapheap with a single off-the-cuff insult.

Le Monde wrote: “In fact, this claim is totally false, and Britain is actually more industrialised than France. Industrial decline is more evident in our country. In 2007, industry in Britain accounted for 16.7 per cent of GDP against 14.1 per cent for France. And this statistic did not change in 2011.”

Other French newspapers pointed to figures from France’s own statistics and economic studies institute INSEE, which also recently reported that industrial production in Britain is almost 5 per cent higher than it is in France.

Token tax

Mr Sarkozy is also being criticised at home and abroad over his plans for a ‘Robin Hood’ tax on financial transactions in order to curb short-term speculation in the banking industry, mainly on foreign exchange deals. The levy will be introduced in August in France regardless of whether other European countries follow suit, Mr Sarkozy has declared.

But prime minister David Cameron described the tax – also known as the Tobin Tax after American economist James Tobin – as ‘utter madness’.

London mayor Boris Johnson has also said Britain would welcome ‘with open arms’ any French banks that want to relocate to London to escape the new tax. Mr Johnson said: “Bienvenue a Londres! This is the global capital of finance. It’s on your doorstep and if your own president does not want the jobs, the opportunities and the economic growth that you generate, we do.”

Angela Knight, chief executive of the British Bankers Association, added: “They are going to tax business that can easily shift elsewhere. But this is all part of the French political process ahead of an election, just like bonuses are part of the political process in the UK.”

And in France too, experts have warned the new tax could send French financial institutions fleeing across the channel.

Professor Tomasz Michalski, an economist from HEC business school in Paris, told the France24 news channel: “If you tax financial transactions then that activity will simply move elsewhere. Cameron is right about that. The finance industry is a very mobile industry.

“At a time when market conditions are rough this will only make those conditions worse for French companies. A company that wants to list itself on the French stock exchange might consider other places.”

And French stockbroker Eric Valatini added: “The tax is completely ineffective and even counter-productive. Within six months investors will have found a way to bypass the tax and will have created investment funds abroad for French companies.

Tais-toi

The playground spat over who has the most industry and the argument over the Tobin Tax are only the latest in a recent series of public slanging matches between Britain and France.

After David Cameron vetoed a new EU treaty and ‘fiscal pact’ between European nations at the summit in Brussels in October, Mr Sarkozy told him: “You have lost a good opportunity to shut up. We are sick of you criticising us and telling us what to do’

He then told a reporter on the BBC’s Newsnight programme in November: “Perhaps the fact that you come from an island, you can’t understand the subtleties of the European construction.”

And days later his finance minister Francois Baroin said publicly that he would ‘rather be French then British’ in the deepening EU debt crisis.

Mr Baroin told listeners on Europe 1 radio: “It’s true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment. We don’t want to be given any lessons and we don’t give any.”

But despite the catalogue of crossChannel bust-ups, Mr Cameron has insisted he and Mr Sarkozy are still friends, telling British newspapers in January: “I think he is a remarkable man. I am full of admiration for Nicolas, but every now and again he says something I don’t agree with.” n