Splintering and dissent continues in a major way as Christian Noyer, head of the Bank of France, attacks the fiscal rating of the UK following a negative outlook review of France by the rating agencies. In Portugal, socialists talk openly of default as a weapon.
Portuguese Socialists Threaten “Economic Atomic Bomb”
Ambrose Evans-Pritchard at The Telegraph writes Talk of ‘nuclear default’ sums up Left’s anger at EU dictates
Tempers are fraying in austerity-racked Portugal. A top socialist politician was taped at a party dinner calling for diplomatic warfare against the EU’s northern powers and issuing threats of debt default.
“We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won’t pay,” said Pedro Nuno Santos, vice-president of the Socialist Party in the parliament.
“Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble,” he said.
The comments came as Portugal slides deeper into recession, with the economy expected to contract by 3pc next year. Protesters marched through Lisbon on Thursday denouncing plans by the new conservative government to raise the working week to 42 hours. Wages are being cut 16pc for higher paid, and 8pc for lower paid public workers.
The parliament passed a fresh austerity budget earlier this month under the terms of its €78bn loan package from the EU and the International Monetary Fund.
Mr Nuno Santos said Europe’s southern states should join forces to resist the austerity dictates and contractionary policies being imposed by the core powers. “It is incomprehensible that the peripheral countries don’t do what the French president and the German Chancellor do. They should unite,” he said.
Fitch Sets France Rating Outlook to Negative
Bloomberg reports France’s AAA Outlook Cut; Fitch Reviews Others
Fitch Ratings lowered France’s rating outlook and put the grades of nations including Spain and Italy on review for a downgrade, citing Europe’s failure to find a “comprehensive solution” to the debt crisis.
“Of particular concern is the absence of a credible financial backstop,” Fitch said in an e-mailed statement. “In Fitch’s opinion this requires more active and explicit commitment from the ECB.”
Without a full solution, Fitch said the crisis will persist, “punctuated by episodes of severe financial market volatility that is a particular source of risk to the sovereign governments of those countries with levels of public debt.”
Head of French Central Bank Attacks UK and Rating Agencies
In response to various outlook downgrades of France, Christian Noyer, head of the French central bank attacked the rating agencies and amusingly the UK.
When is the last time a major central bank head attacked the debt rating of another country? I cannot recall such a time but it has happened now.
Britain should have its AAA credit rating before France, according to Christian Noyer, head of the French central bank, as the war of words between the two countries heats up following David Cameron’s EU treaty veto.
“The downgrade does not appear to me to be justified when considering economic fundamentals,” Mr Noyer said in an interview with local newspaper Le Telegramme de Brest.
“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,” he went on.
“Frankly, the agencies have become incomprehensible and irrational. They threaten even when states have taken strong and positive decisions,” the central banker said. “One could think that the use of agencies to guide investors is no longer valid.”
French Foreign Minister Alain Juppe said yesterday that decisions by rating agencies were “sometimes subjective and political”, and that any loss of France’s top-notch AAA rating would be regrettable but not disastrous.
With that attack on the UK it is plain to see the poisonous atmosphere following the do-nothing over-hyped treaty proposal of Merkozy has gotten much worse.
Mike “Mish” Shedlock
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