'Hot Autumn' tests Juppe's will to fight

Today's one-day strike by public employees in France may have momentous consequences for French foreign and economic policy. If the embattled Prime Minister, Alain Juppe, fails to beat off the growing challenge from the public sector unions, international markets may judge that his government lacks the determination for the stringent economic policies needed to ensure that France qualifies for a single European currency in 1999.

That in turn could delay or even bury monetary union, a project on which the bulk of the French political elite has set its heart, especially since Germany's unification in 1990. "It is now crucial that the government faces down the unions in what is increasingly looking like a 'hot autumn' on the industrial relations front. We are somewhat sceptical about the government's stomach for a fight," said David McWilliams, an analyst at UBS Global Research in London. The franc and the French stock market have fallen since Mr Juppe forced the tough-talking Finance Minister, Alain Madelin, to resign in August after he urged cuts in civil service jobs.

Other experts warn that France's political establishment views European monetary union as so vital to the national interest that the government is unlikely to cave in to the unions. They believe the government will make every effort to meet the Maastricht treaty targets for joining a single currency, even at the cost of an unemployment rate around the present level of 11.5 per cent.

The strikers want the government to reverse a public sector pay freeze announced for next year. The freeze is part of an economic programme designed to reduce France's budget deficit from 5 per cent of gross domestic product to the 3 per cent needed to meet the Maastricht targets. Government officials say some employees will get a pay rise next year because of wage accords in the pipeline. But in a sign that public opinion is not solidly behind Mr Juppe, a survey published in Le Figaro suggested that 47 per cent of French people approved of the strike. Only 48 per cent disapproved.

Union leaders say the public appreciates their argument that they are being made scapegoats for France's economic problems. The Civil Service Minister, Jean Puech, responds that the government cannot afford extra pay rises in 1996, but is willing to negotiate increases in a deal covering the next two or three years.

From the government's viewpoint, today's strike may be a harbinger of worse to come. Union leaders have warned that they will not tamely accept Mr Juppe's plan for the complete elimination in two years of the state's Fr68bn (pounds 8.6bn) welfare system deficit. The Prime Minister has not yet explained how he proposes to wipe out the deficit, another factor prompting market scepticism about the government's policies. Mr Juppe is struggling to hold this year's overall deficit to Fr320bn (pounds 40bn) and cut the 1996 shortfall to Fr290bn (pounds 37.6bn).

A study released yesterday said that Mr Juppe's budget, which raises tax revenue but allows a 1.8 per cent increase in spending, was not likely to bring the deficit as a proportion of GDP down to 4 per cent next year, as the government projected. The figure is likely to be about 4.5 per cent, according to the French Observatory of Economic Performance, though it said unemployment was expected to continue its fall.

The Organisation for Economic Co-operation and Development says state workers in France made up 25 per cent of the workforce in 1993, compared with 14.5 per cent in the United States.

French state sector workers

Education service 1,000,000 Hospital service 830,000 Post Office, France Telecom 500,000 Military personnel 300,000 Finance Ministry staff 200,000 Policemen 130,000

Other Central and local govt 2,000,000 Total number of fonctionnaires 5,000,000