Giscard's Precarious Balancing Act

...Putting aside economics, they stress French "national interests," "anti-Americanism," and the "betrayal" by Giscard...

...Yet the more telling truth is that France's dependence on imported energy has grown by 15 per cent in recent years, while Germany's reliance has decreased significantly and that of Italy...

...These experts insist prices will jump again once the freeze ends...

...When Barre—after a month in office—announced his economic program, most observers were disappointed...

...As political pundits speculated about the inevitable break between Giscard and Chirac, the two tried to patch things over...

...Giscard considered the next tax a modest but important step toward a more equitable "Liberal Society," whose introduction he hopes will secure him a prominent place in French history...

...At the same time, the Left is engaged in an effort to broaden its base by becoming more palatable to the middle class and the liberal intellectuals, without losing support of the proletariat...

...In the next 12-month period, the figure is expected to skyrocket to between $2.8 billion-$3.2 billion...

...and why the idea of a "social contract" along the lines the majority of people in Britain seem ready to accept is an anathema to employes and employers alike...

...Many consider it impossible to restore France's economic health without basic structural changes in the production and distribution of the national product...

...It is the reason why so many people here are unwilling to join in a common national effort to correct the inequality...

...Even the upper-middle class has little cause to groan under the new fiscal burdens...

...Old-line Gaullists howled with anger at an article by General Guy Mery, the new Chief of Staff (and a close associate of Giscard), suggesting that America's assistance in the defense of Western Europe was indispensable, and that in case of war France should join its Atlantic allies to protect Germany...

...A study of income distribution published last August by the Organization for Economic Cooperation and Development (OECD) concluded that the distance separating the rich and the poor is much greater in France than in any democratic?or not-so-democratic—industrialized country...

...the remedy for the country's maladies, in their view, is returning to the patriotic values (and social and economic conservatism) attributed to Charles de Gaulle...

...But most experts saw the belated complaint as a politically motivated reaction to growing criticism of the Prime Minister's economic measures...

...Unemployment was nearing 1 million and growing...

...What is more, the economic gap reflects, and helps to maintain, France's rigid conservatism...

...It also explains why no French government can hope to get honest tax declarations—let alone property declarations—from businessmen or professionals...

...It included increased petrol prices, an extra excise tax on alcoholic beverages, a relatively minor increase in income and corporate taxes, and a three-month freeze on all prices supported by a six-month freeze on government expenditures...

...Chirac was given some additional titles and functions...

...In a reversal of traditional Marxist maxims, the politics of the Fifth Republic seem to determine its economics...

...Nothing in the government's measures, it is also noted, deals with the contradiction between the desire to restrain expenditures and the wish to stimulate economic activity...

...They further contend that the promise to reduce the value-added tax by 2.5 per cent (to hold down prices after the freeze) is self-defeating...

...As journalists in Paris were quick to calculate, the very rare citizen who admits to a $100,000 taxable income will now contribute $1,500 more than the $32,000 he had been paying...

...In the first nine months of this year, wage increases averaged 15 per cent, and prices rose 11 per cent, leaving a real increase in wage-earners' purchasing power of 4 per cent...

...Giscard, in contrast, has expanded the areas of Presidential concern to take in economic policy and personally directs even secondary matters of implementation (reportedly down to such details as the type of flowers to be placed on the table at important state dinners...

...but the President's proposals for liberal economic reforms aimed at pulling votes away from the opposition are constantly stymied by the majority within his own coalition...

...The man on the street hardly needed the study to tell him this...

...Nobody doubts his good intentions...

...This brings us to what may be the root of France's economic crisis...

...inflation was running at an annual rate of 11-12 per cent, accompanied by an equal (if not faster) depreciation of the French franc on the world currency markets...

...Similarly...

...And lack of rain did cause severe agricultural losses, forcing the government to provide farmers $1.2 billion in assistance...

...In a year of inflation, of a weakening franc and of a bad summer drought, moreover, it is easier to count the losses than the gains...

...Giscard wanted his erstwhile protege to help discipline the Gaullist troops...

...Nor does Barre appear sanguine about increasing tax revenue...

...and, second, that President Valery Giscard d'Estaing's own Independent Republican party, with 51 seats in Parliament, is the junior partner in a 181-seat coalition...

...President Giscard seems clearly aware of this, too...

...For them, any tampering with the existing distribution of wealth and income smacks of Communism...

...Such a shift, however, is anathema to the dominant die-hard Gaullists...

...The much-heralded rise in the rates?-8 per cent "on middle and high incomes" —is clearly not intended to affect the average Frenchman...

...This has placed the government largely on the defensive, and like any ruling party it is more often held responsible for what goes wrong than for what does not...

...But serious obstacles may prevent the achievement of their goal...

...When Chirac finally quit the Matignon at the end of August, he cited this "refusal to grant the necessary authority" as the reason for the resignation...

...Significantly, public opinion polls conducted on the eve of the June Italian elections indicated Frenchmen were less convinced by such statements than were Italians...

...The situation the new Prime Minister inherited was far from encouraging...

...Raymond Barre, the calm, jovial, highly respected economics professor and former EEC Commissioner satisfied the requirements...

...They had expected more originality, if not daring, and doubted his grab-bag of fiscal measures would go very far toward solving the country's problems...

...Eliahu Salpeter, a regular contributor, is currently a European correspondent for Israel's Ha'aretz...

...even before the drought the French treasury—under one pretext or another—was subsidizing farmers to the tune of $600 million a year...

...The Prime Minister's departure provided Giscard with an opportunity to pick a replacement who would both be more pliable and offer the promise of being able to handle France's economic woes...

...The President felt particularly betrayed by his Gaullist Prime Minister, Jacques Chirac, who gave the bill only lukewarm support...

...why no government dare ask workers to accept a wage freeze...

...Strains in the government coalition began to surface at the start of last summer...

...These figures reflect the present fundamental realities of French society and they constantly set the (rather narrow) limits of economic action open to President Giscard and his government...

...The French—employed or unemployed—purchased more abroad, producing a trade deficit for the past 12 months totaling $1.3 billion...

...By the time Parliament finished passing some 600 amendments to the bill, it had changed the legislation almost beyond recognition (and beyond any real fiscal or social significance...

...But he left all implementation, as well as some major questions of domestic and economic policy, to his Prime Minister...

...There is little possibility of coping with this situation by stepping up tax receipts...

...Roughly the same division of responsibilities was observed by his successor Georges Pompidou...

...The differences proved irreconcilable...

...The President believes (though he would, of course, never say so publicly) that the country must be moved somewhat away from the Right to prevent the Left from taking over French democracy...

...While Giscard dreams of splitting away part of the Socialists from their Communist allies, the Communists have been trying to make friends and gain influence with the Gaullist Right-wing...

...Of course, the higher benefits and wider eligibility will have to be covered by the supposedly deficit-proof government budget...

...Nevertheless (again as generally happened in West European countries), the added purchasing power did not reduce domestic unemployment...

...The most serious criticism, though, concerns the failure to confront the very social and economic divisions cited in the OECD report...

...THE POLITICS OF FRENCH ECONOMICS Giscard's Precarious Balancing Act BY ELIAHU SALPETER Paris The two basic facts of French political and economic life are, first, that the Gaullist-led ticket won the last elections by a slim 50.7 per cent majority against 49.3 per cent for the Socialist-Comimunist opposition...

...the proportion of those looking for jobs went up 6 per cent in the past three months...

...Labor Minister Christian Beullac has explained that although the GNP index has risen in four years from 100-162 points, the Social-Security index has hit 205 points...

...It was as part of this campaign that French Communist boss Georges Marchais pointedly cooled his relations with Moscow, and Socialist leader Francois Mitterrand attempted to reassure the public that in the event of a Leftist victory, his party would be in charge, guaranteeing the continuation of a free parliamentary system...

...Prime Minister Barre has promised that in the next budget expenses will be fully covered by receipts...

...De Gaulle, in his days, insisted on absolute command over the basic direction of government and the fundamental issues of defense and foreign policy...

...In mid-October Barre suddenly protested to the OECD that the study it issued was grossly inaccurate...

...French taxpayers are famous for their tax evasion techniques...

...Indeed, it is true France depends on imports for 82 per cent of her energy needs (compared to 51 per cent for Germany and 61 per cent for the EEC overall...

...The simple fact about the French economy (and, incidentally, about most West European economies today) is that it consumes more than it produces...

...A major problem is the Social Security System's deficit, estimated at some $800 million this year...

...That may be bad for France, but it is no less a hard reality of French politics than the Socialist-Communist alliance hopes to benefit from Giscard's predicament by exploiting the inequality issue to gain the additional .4 of 1 per cent of the vote it needs to become the majority in the next parliamentary elections...

...Characteristically, the President swiftly denied he was inching back toward participation in NATO, and the furor soon blew over...

...Thus, the coalition members live in constant—and rather justified?fear that a minor slip in popularity may turn them out of power in the next elections...

...He is equally aware, however, that the Gaullist majority of his coalition will not tolerate such changes...

...The Left, and particularly the Communists, sense the opportunity...

...Making a Gaullist-sounding televised pitch in support of this package, President Giscard claimed the main sources of trouble were the fourfold increase in the price of oil and the summer's drought...

...Belgium and Britain has increased only by single-digit percentages...

...When the capital gains bill next came before the National Assembly, though, he was unable to sidestep the obstinate opposition from many of his supporters...

...On the contrary, many here feel balanced budgets are a fetish the Prime Minister shares with President Giscard...

...Chirac, meanwhile, sought more independent power and authority, a desire running squarely counter to what has become known in political salons as "Giscard's concept of a Regal Presidency"—a distant (and presumably much less dangerous) cousin of Richard Nixon's "Imperial Presidency...

...In plain language this means France's expenditures for public health insurance, old-age pensions, maternity benefits, etc., have been growing twice as fast as the national product that must support them...