and MARY DEJEVSKY
The French government has abandoned the privatisation of France Telecom, the monopoly telephone network operator, in an apparent attempt to appease trade unions and employees.
Alain Juppe, the Prime Minister, ended months of speculation by saying that the company's statute would be changed to meet the challenge of competition when the European telecommunications market is opened up on 1 January 1998, but that it would remain in state control.
Mr Juppe said that the state would retain a majority stake in France Telecom with employees preserving their status as public employees and the benefits of secure employment and pensions.
However, the government angered one of the main trade unions, Force Ouvriere, by accepting the principle of an independent regulatory authority outside both France Telecom and the government.
The independence and strength of the regulator has been of great concern to BT and other operators who wish to compete in French public telephony. A spokesman for BT said: "It is also important that there should be the appropriate pro-competition law in place."
Mr Juppe said that France Telecom would be required to evolve to compete "on an equal footing with its competitors" - and that a Bill enshrining the necessary changes would be laid before the French parliament this spring.
The decision to stop short of wholesale privatisation will be seen as a blow to Francois Fillon, the minister of post and telecoms, who had called for rapid sell-off. The cautious wording of the statement appeared to reflect the French government's concern not to provoke a repetition of events last November, when plans to restructure the state railway company, SNCF, and alter public sector pension arrangements, sparked off four weeks of strikes and protests and paralysed the national rail network. As part of the price of a return to work, the government had to abandon the whole SNCF restructuring plan.
A recent report from the prime minister's office found that the "special status" of France's public sector was not incompatible with EU deregulation. However in spite of yesterday's statement it remains unclear whether privatisation has been ruled out completely or merely postponed for the forseeable future.
There is also uncertainty as to whether the pledge to preserve the public service status of employees will extend to those recruited after the law is changed.