Although the French (along with the Germans) have sharply lost competitiveness against the devaluing British and Italians, the pain of ERM membership is not yet as acute as it was in Britain last September. The French debt burden is lower, and Europe is also seven months closer to the sharp cut in German interest rates that the deteriorating state of the economy justifies.
Edouard Balladur, the likely Prime Minister, is certainly a pragmatist. He promised not to devalue before 1986, and promptly did. But he is also astute, and it is hard to see what he has to gain by breaking the link with the mark just when it may be about to become an easier mistress.
Mr Balladur has another incentive for holding on. The referendum campaign made it clear that most of the Right are as committed to Maastricht and a single currency as the Left. The reasons are often Ridleyesque, but none the less heartfelt. The French want to integrate the German economy as closely as possible with the rest of Europe precisely because they are afraid of German freedom of action.
This desire to keep Maastricht on track is one reason for hoping that the new government's bite on trade may prove less fearsome than its bark. The government will be anxious to keep Bonn in line, and Chancellor Kohl badly wants a deal on the Uruguay round of the General Agreement on Tariffs and Trade. Free traders must look to Bonn and keep their fingers crossed.
Despite France's ERM-inspired recession - it is likely that the 0.5 per cent drop in national output in the fourth quarter will be a down- payment on more declines - the French equity market is likely to continue the bull run that began in October if interest rates tumble. That in turn will provide the new government with an improving environment for its other main change of direction, privatisation.
The RPR-UDF manifesto pencilled in a sales target of Fr40-60bn in the first year and Fr200-300bn over a five-year period. The privatisation programme should also help to fund some of the new government's promised spending and tax commitments, which will in turn help to strengthen a 1994 recovery.Reuse content