The dollar has the French seriously concerned. The recent strength of the American currency against the French franc threatens to undercut one of the key elements of the Mitterrand administration's economic strategy - the elimination of France's high trade deficit.
The dangers of a strong dollar to the French economy have been a major source of government concern for some time. But the alarm bells have been ringing with added volume since the end of last week. when the dollar hit a record level of 7 .32 francs in Paris, 10 percent above the level at the start of this year.
This is serious for the French because this country's high oil-import bill is denominated in dollars. The Mitterrand administration had been counting on the recent fall in the OPEC oil price to play a big role in achieving its aim of slashing the trade deficit this year. The rise in the dollar is now compromising that aim.
Doing something about France's poor trade performance became a top government priority at the end of last year when the deficit shot up to 93 billion francs - expensive foreign borrowing. The target is to cut the trade gap in half this year and to completely eliminate it in 1984. If France does not do this, it will find itself sinking steadily deeper into debt.
When the Organization of Petroleum Exporting Countries cut the oil price from The estimate in Paris was that the price cut would save France 20 billion francs ($3 billion) this year, almost half the total savings aimed for on the trade front. But then the dollar began to rise as international monetary operators moved funds into the US currency. In mid-March, a dollar was still worth well below 7 francs. In the week between March 17 and 24, it shot up from 6.88 francs to 7.27 francs. After a small fall in the first week of April, the dollar was off on another rise, taking it to 7.32 francs April 14.
If this state of affairs continues, France will lose about half its expected oil savings this year. If the dollar rises further, of course, the situation will be even worse and the Mitterrand administration will have to look for other ways of making the required savings on its import bill.
The effect on France of the recent rise in the dollar's value has strengthened the government's abiding concern about the absence of any overall international system to allow governments to have greater control over currency movements. Major West European continental currencies are linked together in the European Monetary System (EMS), which prevents them from fluctuating too wildly. But what bothers the French is the way in which the all-important dollar has been left to move up and down purely in reaction to free market forces.
France would like some form of agreement by which national monetary authorities would take action to prevent excessive movements of currencies, such as the recent rise in the dollar. Presenting the administration's latest economic program to Parliament last week, Finance Minister Jacques Delors stressed the need to find ways of overcoming monetary disorder. A better organization of exchange markets was, he said, a necessary element in putting the world economy right.
The French have few illusions that they are likely to get anywhere on this score with the Reagan administration. They have drawn some comfort from several recent international reports showing that intervention by monetary authorities to stabilize currencies can be valuable. But they know they cannot expect much from Mr. Reagan when major industrialized nations meet in Williamsburg, Va. next month.
This means that, despite having devalued the franc in the European Monetary System only last month, the French are likely to face fresh pressure on their currency later this year. With a few exceptions, such as food products, French exports are not proving competitive with those of West Germany or Japan. Inflation is still rising in France while it is falling in other major trading nations, making French goods more expensive and less attractive overseas. Predictions of a new franc devaluation are already being heard.
Against this background, President Mitterrand has got one thing going for him in his dealings with Washington. Under its Socialist President, France has proved a staunch ally of Mr. Reagan in his dealings with Moscow, despite the presence of four Communists in the government.
After two decades in which France's position toward the Atlantic alliance was frequently uncertain, Mr. Mitterrand has lined up solidly with Washington on the need to show firmness to the Kremlin and to build up nuclear weapon strength in West Europe if the current missile talks in Geneva fail.
Will France's firmness on East-West matters entitle it to some American concessions on the currency front? The current preparations for the Williamsburg summit may give some glimmer of an answer. For France, the prospect of some form of international economic solidarity would be about the most welcome development the Mitterrand administration could hope for in the second half of 1983.