French Premier Finds Honeymoon in Eclipse

By Craig R. Whitney, New York Times, 3 July 1997

[P]ARIS—Campaign promises have been many a politician's undoing, but few have found out so quickly how hard they can be to keep as France's new Socialist premier, Lionel Jospin.

Elected only a month ago, Jospin is not only being taken to task by his opponents for not trying harder to cut the government deficit so that France can join in a common European currency, but also by his supporters for not doing more about jobs.

We will not allow the government to forget its commitments in the name of realism, Marc Blondel, leader of the powerful Workers' Force labor union, said last week.

And Louis Viannet, secretary general of the Communist-led General Confederation of Labor, warned earlier that there would be a very big clash if the government turned the screws later this year to try to get the budget deficit down.

Last week, Jospin told members of his party that measures to create the 700,000 jobs he promised during his campaign would have to await a thorough audit of the government's books.

To improvise when we have a whole series of national and international engagements to meet, to improvise as a response to impatience would be to guarantee failure, he said.

Over the weekend, his government threw up its hands and allowed Renault, an auto maker in which the government has a 47 percent stake, to go ahead with a decision to close an assembly plant in Belgium. Jospin had led a protest against the closing last spring, before the election on June 1 that propelled him into the premier's office.

To some extent, of course, Jospin is the victim of expectations that he helped to create—that electing him would mean an end to the unpopular austerity measures his conservative predecessor, Alain Juppe, took to try to qualify France for the common currency, the euro, which is to begin in 1999.

Dominique Strauss-Kahn, Jospin's economics and finance minister, told legislators last week that, as things stood, France's budget deficit might end up this year at between 3.6 and 3.8 percent of gross domestic product. That would be down from over 4 percent at the start of the year, but not down far enough to meet the 3 percent limit set for countries that want to join the euro.

Germany, where voters are nervous about giving up one of the world's strongest currencies, has been insisting that 3 percent means 3 percent, and Chancelor Helmut Kohl's top deputy said on Wednesday that a French deficit of 3.6 percent would be a problem. But Germany, too, is having trouble coming up with enough spending cuts to make this limit.

Although the 1992 Treaty on European Union, which established the common currency, set the deficit limit at 3 percent, it left leeway for countries that have reduced their deficits substantially and continuously and come close to the limit.

Kohl rejected a request from Jospin last month for German help in financing big European public works projects to create jobs.

French officials say that Jospin is counting on the Germans to relent next spring, when European leaders will make the final decision on which countries will be permitted to go ahead with the euro, and that Germany will join in agreeing to allow France in for doing the best it could. But the conservative Bavarian wing of Kohl's Christian Democratic organization is threatening a mutiny if he goes along with relaxing the criteria.

Blondel said the other day that he had the feeling that the French government would try to get the deficit down to 3.4 or 3.5 percent of gross domestic product by the end of this year. To do that, the margins will be reduced, he said, and that would probably be the end of any meaningful job-creation program.

We've already been had once, but we won't let it happen a second time, he said, warning that his union would take to the streets if that was what it took to make Jospin live up to his campaign promises on easing unemployment, which is running at 12.5 percent.

The most conspicuous move Jospin has made to stimulate the economy so far is to raise the minimum wage by 4 percent, effective July 1, to the equivalent of about $6.75 an hour. With employer payroll taxes added on, this means that it will cost companies close to $9.50 an hour to hire a worker.

Many of them, of course, will simply not hire unskilled workers at all and unemployment will rise even further, Charles Wyplosz, an economics professor at the Institute of High International Studies in Geneva, wrote in the daily Liberation.

Pushing the minimum wage up by 4 percent is a disaster, he wrote, but of course you would have to be a heartless monster to oppose a little increase for people earning the minimum wage. More important, Jospin had little choice. His labor union supporters and his Communist coalition partners had demanded an increase twice as big.

He also announced an increase in a payment that families of needy children get at the beginning of a school year, from $72 to nearly $275. But in an economy move, he said that allowances French governments have been paying for 50 years to try to encourage larger families would in the future be limited to households with monthly incomes of less than $4,300.

There have been daily public protests ever since from family lobbying groups, and the government now says that allowances will be stopped for only 8 percent or so of French families.

Jospin has also backtracked on his announced opposition during the campaign to the privatization of important government-owned enterprises like France Telecom. He will need the money privatization brings into state coffers to come close to the budget deficit limit, officials say. A decision on France Telecom is expected in September.