Sarkozy's criticisms annoy Downing Street

Nicolas Sarkozy has sparked a cross-Channel diplomatic row after disparaging Gordon Brown's response to the economic crisis on French TV.

In a 90-minute grilling carried simultaneously on three TV channels last night, the French President said he would not repeat Britain's economic "mistakes", adding that the Prime Minister's flagship VAT cut had "absolutely not worked".

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The Elysee Palace this morning attempted to smooth over the incident, assuring officials at Downing Street that his comments were not intended as an attack on British economic policy.

But a Downing Street spokesman left little doubt of the irritation they caused at Number 10, telling reporters: "The Elysee have been in contact this morning to assure us that these remarks were not meant as a critique of UK economic policy - which is nice."

The spokesman declined to say whether this morning's telephone conversation between officials in Downing Street and the Elysee was initiated by London or Paris.

Challenged last night over his own plans to boost the French economy by infrastructure spending rather than tax cuts, Mr Sarkozy said: "Britain is cutting taxes. That will bring them nothing. Consumption continues to decrease in Britain."

Mr Sarkozy's comments will be particularly unwelcome at Number 10 because they echo the relentless Conservative attack on Chancellor Alistair Darling's temporary 2.5 per cent cut in VAT, which Tories insist is not having the intended effect of shoring up consumer spending.

The remarks - which follow criticisms of British economic policy from senior German and Dutch ministers - may make it more difficult for Mr Brown to achieve international cooperation on the economic crisis when he hosts the G20 summit in London in April.

And they may lead to a strained atmosphere when he and Mr Sarkozy meet at a gathering of European leaders at the end of this month.

Downing Street stressed that Mr Sarkozy's comments were made during a discussion about France's domestic response to the recession.

"It is important to remember the context in which he was making the comments, which as I understand it, was a domestic debate on television about the way forward for the French economy and French proposals for an economic stimulus," said the spokesman.

"I think it is important to keep seeing it in that context."

Downing Street defended the VAT cut, pointing to a recent report by the independent Institute for Fiscal Studies, which described it as a "reasonably effective stimulus" which had prevented sales from falling as far as they would otherwise have done and could be expected to increase purchases by 1.2 per cent over the course of 2009.

The Number 10 spokesman said: "The point about VAT, as we have said all along, is that (the cut) will run for a year so it is too early to judge the effect it has had.

"We have set out quite clearly the case for the VAT cut and all along we have said that other countries must take what measures are appropriate for their own economic circumstances, but the important thing is that we coordinate our response."

Mr Sarkozy's remarks were not the first time that one of Britain's EU partners has questioned the UK's fiscal stimulus package.

Earlier this week, Dutch finance minister Wouter Bos told the Financial Times that the VAT cut was "not a very wise thing to do", adding: "I don't believe it will contribute to a recovery of the economy, whereas it does put pressure on other countries to do the same. It's that type of policy response where I would have liked to see a bit more coordination."

And relations between London and Berlin were strained last year when German finance minister Peer Steinbruck accused Mr Brown of "crass Keynesianism" in his approach to the crisis.

In that case, Mr Brown may feel he was vindicated by the fact that Germany went on to announce a £180bn fiscal stimulus package of its own.