Decline in French jobless rate a shot in arm for Jospin

Unemployment fell 0.6 per cent in France in July, the first significant dent in the jobless figures this year. But opinions differed on how seriously to interpret the fall, which brought the overall unemployment rate down to 12.5 per cent.

At the very least, it seems, the country's booming exports and the beginnings of a recovery in domestic demand may have checked the rise of joblessness, which has been almost unbroken for the past three years. Even the government is reluctant to forecast a substantial erosion of the number of people looking for work - now 3,100,000, or 3,500,000 by the former method of calculation - before the middle of next year.

The July figures, especially a sharp drop in youth unemployment, will be welcome news to the Prime Minister, Lionel Jospin, nonetheless. He told a conference of French ambassadors yesterday that the French budget deficit this year would be close enough to the 3 per cent of GNP guideline to state "with confidence" that the European single currency would start on time.

The forecast depends on a continuing increase in the rate of growth in France, which is expected to touch 3 per cent next year. The fall in the value of the franc, the accelerating boom in exports and continuing low inflation have brightened, if not yet transformed, French economic prospects since Mr Jospin came to power in June.

He is, so far, a lucky Prime Minister. He campaigned on a programme to rekindle growth but growth has rekindled itself, rescuing him from some of the contradictions in his programme. French employers are warning, however, that some aspects of Jospin policy - especially the plan to legislate for a 35-hour maximum working week - could stop growth dead in its tracks.

Employers, unions and the government are to meet next month to discuss this and other suggested ways of reducing unemployment more rapidly. Le Monde reported earlier this week that draft plans existed to postpone the 35-hour week until 2000 but impose extra taxes on anyone who worked more than the existing maximum of 39 hours. The government has denied the existence of such plans.

In his speech to ambassadors yesterday, Mr Jospin gave one of his most cordial endorsements of economic and monetary union (EMU) to date. He said the single currency would help Europe to "regain its monetary sovereignty" and "re-balance the relative strengths of the great power blocks".

His earlier demands for an increase in the powers of economic management of the EU at political level remained. But this could be achieved without damaging the independence of the European central bank.