France Carries Fears to the Polls

French President Jacques Chirac called early elections in hopes of finding voter support for his hardball deficit-cutting policies aimed at preparing France for adoption of a single European currency in 1999. This would be a new Europe, he said, and France needed a new elan to make its economy conform.

What he got instead was a slap in the face at the polls last Sunday. Today, as French voters engage in the second and definitive round of their parliamentary elections, it appears doubtful things will go much better for Chirac and his center-right coalition.

Regardless of the outcome of today’s balloting, the demands of voters to keep their lavish social and welfare benefits have probably doomed the timely implementation of the jewel of the European Union’s Maastricht Treaty, the Euro, or common currency. Most likely, the rules of the Maastricht accord will end up being manipulated to allow either more time to launch the Euro or lowering of the standards required to establish it.

If this is the case, disorder in financial markets is to be expected. Interest rates could go up in some countries and the weaker European currencies might come under attack. Yes, the Euro could be tarnished. But none of that will be the end of the EU.

The consequences of the French election will be domestic. The French are the ones who have to put their economic house in order. As it stands today, in macro-economic terms, France is not in bad shape. Its deficit stands at 4.2% of gross domestic product. Inflation has been kept at 1%. And economic growth, while not dynamic, is expected to be around 2.3% for 1997. But unemployment, now 12.8%, is too high.

A more intractable problem is France’s public services and welfare system. The French taxpayer puts out more for public services than anyone else in Europe. The French public pension system allows some public employees to retire at 50 with full benefits. The government runs the phone company and a welter of other services and businesses that rely on subsidies at the cost of many millions of francs.

Obviously, this kind of public generosity cannot con- tinue. The idea of the European currency and a smoothly working continental economy requires the sort of fiscal and monetary discipline that the British have undergone.

To solve the unemployment problem, Chirac calls for tax breaks for businesses. In contrast, Socialist leader Lionel Jospin has proposed creating 700,000 jobs, half of them in the public sector, by reducing the workweek from 39 hours to 35 without reducing salaries. How he would do this without losing economic efficiency is anyone’s guess.

The French are fearful and doubtful. They are overwhelmed by daily problems and they blame the government. Will they choose the failed statist policies of the Socialists or the painful path of the rightists? They go to the polls today with a tough choice, but one that will be made on French terms, not on the basis of the European Union’s future.