Jobs Battle Against Budget As Priority for France

New leader must fight unemployment without breaking the bank

THE new French government has more resources than any other this century to tackle the nation's No. 1 problem: unemployment.

The parties that dominate the government, constituted last Thursday, have an 80 percent majority in the National Assembly and control of all but two of the nation's regions. In addition, Prime Minister Alain Juppe enjoys a long and close working relationship with new President Jacques Chirac.

The choice of Mr. Juppe to head the new government sent a message of reassurance to France's European partners and the world financial community.

As France's foreign minister for the last two years, Juppe consistently backed moves toward European Union. In 1992, he took the lead in swinging Mr. Chirac's conservative Rally for the Republic party to support the Maastricht Treaty in favor of closer integration among European Union members.

Because Chirac in his campaign called for a new vote on further moves toward European unity, his early moves as president are being closely watched by world markets.

During his campaign, Chirac also criticized the Bank of France for its strict monetary policies that would curb new job programs.

Reports that the new president would seek a revision of the European Monetary System sent the franc tumbling last week, even after government denials that such a policy shift had been proposed ''or even envisaged.''

After a meeting with German Chancellor Helmut Kohl in Strasbourg, France, on Thursday, Chirac insisted that the two nations had ''identical approaches'' toward the construction of Europe. ''We are determined that the engagements of the Maastricht Treaty will be respected,'' he said.

The choice of liberal Alain Madelin to head the key Economics Ministry is another Cabinet pick likely to be welcomed by business executives.

Think tanks that Mr. Madelin set up, such as the Paris-based Euro 92 Institute, early argued the need for deregulating the French economy and privatizing state-run industries. As industry minister when Chirac was prime minister in 1986, Madelin argued for the elimination of his own ministry on the grounds that government should not be involved in the affairs of business.

The new government also includes a dozen women, including two ministers -- the highest number ever.

But doubts persist that the president will be able to meet his campaign pledge to create jobs while meeting EU commitments to halve the budget deficit and maintain a stable currency.

''We saw a smorgasbord of choices that cover a whole range of possibilities during [Chirac's] presidential campaign,'' says J. Paul Horne, managing director of the Paris office of Smith Barney, Inc. ''Our hope is that Alain Juppe will be tough on fundamental policies, such as the fight against inflation, [that he will show] respect for European commitments, and a commitment to working down the budget deficit, which went up very sharply over the last two years.

''The European Monetary system and the 'strong franc' cannot be blamed for France's high unemployment rate,'' he adds. ''Any call for revamping the franc-mark relationship will only set the franc up for more speculation, unless there are moves to reduce the public and social security deficit in a brutal fashion.''

Former French President Francois Mitterrand tried to implement his own jobs program. But he was forced to give up after two years in office, when negative reaction on financial markets drove the government to the brink of bankruptcy in 1983. Chirac's advisers know they may have far less than two years to ease France's 12.2 percent unemployment rate and to ease anxious markets.

The Chirac presidency will also have to cope with French workers and students, who are expected to hold the president to campaign pledges to increase public-sector salaries and the minimum wage, at the expense of further inflating government deficits.

A series of strikes and demonstrations in the public sector are expected to begin this week. Rene Caillot, a spokesman for the large CGT-FO union, describes these actions as a ''warning'' to the new government contemplating privatizations ''not to question the notion of public service.''

''Even though industrial and student unions are very weak in this country, they provide a structure for crystallizing discontent,'' says political economist Jean-Dominique LaFay of the University of Paris I. ''Ever since May 1968, there has been an abiding fear in French political circles that the streets will rise up again. This year is no different.''

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