France prepares to tighten its belt

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A REPORT on the French economy, withheld for three days because of the suicide of the former prime minister, Pierre Beregovoy, forecasts that the public deficit will rise to 341bn francs (pounds 40.8bn) by the end of the year - about twice the sum provided for in the 1993 finance law passed under the Socialist government defeated in the March general elections.

The report, published yesterday by the Gaullist Prime Minister, Edouard Balladur, will form the basis of an expected package of austerity measures he will put to an extraordinary meeting of the cabinet on Monday.

The 30-page preliminary report was prepared by Jean Raynaud, the prosecutor at the Cour des Comptes, a court that monitors public spending. Mr Raynaud will present a fuller version of his report at the end of the month.

The austerity package, likely to combine traditional measures such as extra taxes on cigarettes, alcohol and petrol with a rise in the Generalised Social Contribution (CSG) to help reduce the health service and social-security deficit which accounts for about 100bn francs, was originally due to have gone before the cabinet two days ago.

The CSG, a 1 per cent tax on income, was introduced under Michel Rocard, prime minister from 1988 to 1991, and was virulently criticised by the then conservative opposition.

When news of Mr Beregovoy's suicide broke last Saturday, some of his Socialist colleagues blamed the forthcoming economic news as a factor in his depression. A number of leaks from Mr Balladur's office had said that the new Prime Minister had found the economy in worse shape than he had expected.

Mr Beregovoy, as finance minister - except for a two-year interruption - from 1984 to 1992, and then as prime minister since last year, was praised for his handling of the economy by President Francois Mitterrand in his funeral oration on Tuesday. This was seen as an attempt to head off criticisms of his record.

Mr Balladur, who took over from Mr Beregovoy on 30 March, decided to delay both the Raynaud report and the new measures as a mark of respect. Since the weekend, however, most politicians have been content with directing their ire about Mr Beregovoy's suicide at the judiciary and the media for publicising details of an interest-free loan that he contracted in 1986.

Pierre Mehaignerie, the centrist Justice Minister, said on Wednesday that Mr Beregovoy had asked to see him shortly before his death.

The satirical weekly Le Canard Enchane said this week that Mr Beregovoy was obsessed by the idea that he was going to face legal proceedings over the loan, contracted from a businessman who was later accused of insider trading. Mr Mehaignerie said there had never been any prospect of proceedings.