Chirac sees no need to devalue strong franc

President Jacques Chirac said yesterday that he had no intention of devaluing the franc, and insisted that the economy would come right in all indicators - the budget deficit, interest rates, and jobs - within two years. He was speaking in a French television interview that was clearly intended to reassure international markets about economic policy and persuade French voters that he was keeping his election promises.

Insisting that cutting the 300bn franc (pounds 39bn) budget deficit was his "absolute priority", Mr Chirac said: "It takes courage to reduce the deficits, and I have no lack of it." He also expressed support for his prime minister, Alain Juppe, saying that he had "all the qualities to implement difficult policies".

Mr Chirac's performance, by far the strongest of the five television appearances he has made since he took office six months ago, came at a time of growing disillusionment with his presidency. With seven out of ten French voters admitting to "disappointment" in Mr Chirac and his Prime Minister, Alain Juppe, and the popularity of both men registering consistently below 30 per cent, le chagrin had become the favourite description of the national mood.

Challenged directly about his low popularity last night, Mr Chirac said: "I did not become president to be popular or to groom my popularity, but to deal with a difficult situation." His support for Mr Juppe, whose future has been the subject of much speculation, both because of a scandal over his subsidised flat and because of what many see as a lacklustre performance as Prime Minister, was pointed, but not unqualified. Praising Mr Juppe's qualities - "courage, determination and intelligence", he declined to respond when the interviewer asked "and his faults?"

Of the franc, which has suffered a difficult few weeks on the international exchanges, Mr Chirac said: "There is not the slightest reason to devalue." Enumerating the strengths of the French compared with the German economy - its lower inflation rate and record foreign trade surplus - he insisted that the franc was at its correct level against the mark.

On Wednesday, just before Mr Chirac set off for Bonn, pressure on the franc reached the point where the economy minister, Jean Arthuis, went on the record to deny that France would change the central value, or the ERM parameters, of the franc against the mark.

On the economy generally, Mr Chirac said he had done "what was necessary to ensure that the deficits would be reduced" and so created conditions for interest rates to come down. "The conditions have been met, I am convinced that the rates will come down, and that confidence will return."

A poll published this week for the financial daily Les Echos found that economic confidence was as low in France as in the international markets.