Howard Davies: The French are bitter about 'le French-bashing' from the British

The MT Diary: Howard Davies on the fraught relationship between the British and the French, London's reputation as the world's financial centre, and cardigan shopping in New York.

by Howard Davies
Last Updated: 21 Jan 2013

Anglo-French relations are an up-and-down affair. Sometimes they are beset by mutual suspicion, repeated misunderstandings (whether deliberate or accidental) and occasional outbreaks of open hostility. At other times, they are downright bad.

Just now, Plan B is in operation. The French are bitter about what they see as a 'le French-bashing' in the British press, led by The Economist. Its cover story with a picture of a bundle of baguettes, like sticks of dynamite, under the heading 'The time-bomb at the heart of Europe' struck a nerve. Then there was the Mittal episode, where the French threatened to nationalise an underused steel plant after the company announced the closure of two blast furnaces. Boris Johnson took advantage of a speech in India (in a language which might possibly have been French) to invite foreign investors to cross the Channel and walk down David Cameron's red carpet.

These tragi-comic episodes would have little consequence if the core political relationship was robust, but it is not: there is no great warmth between Cameron and Hollande. Hollande thinks the British are obstacles to a necessary reconstruction of the eurozone. So what? Well, the Governor of the Bank of France, Christian Noyer, broke cover and incautiously told the FT that it was not acceptable for London to remain the financial centre of the eurozone. He declared a clear objective of pulling euro transactions back to Paris or Frankfurt. We have long suspected the ECB of aiming to do this, but Trichet and Draghi have not been indiscreet enough to say so.

Boris responded at once, as you might expect, telling M Noyer to put his baguette where the sun don't shine. But you could tell this was serious when Vince Cable spoke up firmly in support of the City. So Noyer has done the impossible: producing a reconciliation between Dr Cable and the banks. Chapeau! M le Gouverneur.

The threat is not an idle one. The Government's veto of the proposed treaty last December has created a new environment. The Brits are seen, even by former friends, as outsiders and leaders of the awkward squad. The line, still trotted out in the City, that London is a European asset, takes no tricks now. The Banking Union will produce consolidated regulation in the euro countries, and however the voting rules are tweaked, we will become price-takers. There are many signs, too, that the single financial market is coming apart. Cross-border lending within the EU is down, and countries are requiring banks to set up local subsidiaries, with separate capital. Even the UK is doing so.

How far will this go? Is the era of London as the European financial centre drawing to a close? The answer is not yet clear, but it would not be surprising to find overseas banks hedging their bets by rebalancing their activity, putting more business inside the euro area in case the ECB cuts up rough. They are not keen to do so, what with all those bankers' children well settled at Westminster and St Paul's, but they will do what they have to do. One curious outcome, after all the French criticism of the cowboys in the City and rubbishing of our manufacturing weakness, may be that we trade bankers for blast furnaces.

So it was a relief after Paris to go back to the US, where Brits are still persona grata. The Americans, luckily, have totally lost interest in Europe, what with hurricane Sandy, the election, and the fiscal cliff.

Only a bout of vomiting stimulated by the embryonic third in line got us back on the front pages.

My verdict from a pre-Christmas trip to New York is that the US economy is nothing like as anaemic as ours. The recent growth rate is close to 3%. On a stroll up Madison Avenue between meetings, I spotted a cardigan that looked like a handy extra present for the mother of my children. It's a bit of a risk buying clothes for one's wife, but the pay-off is good if you succeed. So I was a brave boy and went into a very feminine boutique. It was a mistake. There was no meeting of minds. They don't know what a cardy is, and I didn't think a woolly could possibly be priced at $1,075. I beat a hasty retreat. I will stick to window-shopping on Madison in future, or what the French call 'window-licking'.

But not everything in New York is expensive. You can get 340 French Kisses for the price of a cardigan. The French Kiss in question is, of course, a Nova Scotian mollusc that they will shuck for you at the Oyster Bar in the bowels of Grand Central Station. I went there first in 1969 and nothing has changed since, not even the tablecloths (or indeed the waiters).

Americans can be very sentimental. The new Yankee Stadium is a faithful copy of the old. If they had been in charge, the Emirates stadium would look just like Highbury, with refurbished cannons. If that had happened, maybe Arsenal would still be playing football.

Talking of which, in New York I called on the Port Authority, which also controls the airports. I wanted find out about how it plans airport capacity as background for my enquiry into the UK's problem.

The meeting was nearly over before it started. One of my interlocutors was decked out in a Manchester United scarf. The Port Authority was alarmingly well briefed on my own contrary affiliation. She turned out to be a core member of the Manhattan Reds, who must be right up there with the Cockney Reds and Justin Bieber fans as people with whom you don't want to spend time. But I stayed and suffered, and it turned out she was a mine of useful analysis. The things I do for my country.

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