Mitterrand's fight to keep franc afloat; France's Socialists: out of fashion?
Paris — France's senior civil servants are now flying tourist instead of first class.
The bureaucrats' loss of perks is just a small part of the austerity program France's Socialists have put into place recently. After a first year of sprinting for economic growth through heavy public spending, the Socialists are dashing for cover.
The Socialists began to shift course four months ago when they imposed temporary wage-and-price controls. Since then, planned spending in 1983 has been slashed, the wealth tax watered down, and inflation-indexed wages scorned.
Recently, a yet more dramatic step was taken to end the current $4.3 billion social security deficit: nonsalaried workers and early retirees were slapped with stiff new taxes, cigarette and alcohol levies were raised, and charges for hospital stays increased.
The reasons for the tough measures are clear. The franc remains under attack, falling to a record low of 7.21 against the dollar last week. The trade balance continues to worsen, and will probably reach more than $12 billion this year. And September economic trends indicators show falling indices in almost every branch of French economic activity.
Inflation is down - in July and August prices rose less than half a percentage point. But economists expect it to rise once the price freeze expires at the end of the month.
Largely because of the economic woes, Socialist popularity has dropped in recent months. Polls now indicate that about half of the French population renders a ''negative'' judgment on President Francois Mitterrand's first year.
The harshest criticism has, of course, come from the conservative opposition and business leaders. Jacques Chirac, Paris mayor and neo-Gaullist party leader, predicted recently that ''the Socialist experiment won't last two years.''
But the criticism cuts across political lines. Even the left-wing Nouvel Observateur, until now a strong supporter of Mr. Mitterrand's government, is sounding the alarm.
''Who can deny a decline in confidence?'' asked editorialist Jacques Julliard. He called for ''a government facelift'' to rid the government of its ''amateurism and welter of contradictions.''
Still, the Socialists remain publicly optimistic. Finance Minister Jacques Delors has been saying that the effect of a more competitive franc rate after the June devaluation, combined with a slowdown in domestic growth caused by spending cuts, will produce a clear improvement in the trade deficit by the end of the year.
Mr. Delors also believes that continued government direction of prices (though outright controls will be discontinued at the end of the month) and a tight monetary policy will bring inflation down from 12 percent plus this year to 8 percent next year.
Finally, the government is continuing to invest heavily in high technology research and industry. So investment is being increased next year by 24 percent, or 11 billion francs. In the long run, a Finance Ministry official says, this will put the economy on a solid footing.
This plan has not put business's doubts to rest. Pessimistic assessments of the Socialists' ability to manage the French economy still abound.
''It's rather impressive what the Socialists have done in recent months,'' says a leading French economist. ''But in the first year they loaded up the boat with so many stupid measures that in trying to make this 180 degree turn, they are in danger of capsizing.''
The economist said the organizational problems created by the nationalization of banks and 11 of the country's large industries were far from solved. The nationalization measures, he added have created a dismal investment climate.
Moreover, the Socialists have several difficult tests coming of how serious they are with austerity program.
How are they going to keep their promises to cut spending with their commitment to bail out France's ailing industries? And after the wage freeze ends at the end of the month, how are they going to get the unions to agree to hold wage hikes down, a prerequisite most economists believe for inflation to drop over the long term?
Even if inflation does drop from double into single digit figures next year as the Socialists hope, this will not remove the franc from pressure. A large inflation differential with West Germany, France's main trading partner, will remain.
Bankers here expect the Socialists to devalue the franc for a third time since last October. The question is when.
To defend the franc, the government recently took a $4 billion standby credit from international banks. This should provide relief to get through the winter.
Most bankers think this will put things off till the spring, when important local elections will be held. Those March elections will be a litmus test for the Socialists.
The opposition is gearing up for them with attacks on the government's economic management. The Communists, and their powerful union, have even begun to distance themselves from their Socialist government partners.
''The government is doing everything they can to hold off the devaluation until after the elections,'' a banker says. ''I don't know if they can do it.''