Paris malaise bodes ill for Europe

FRANCE IN CRISIS : This is no ordinary strike, Tony Barber explains. It has implications for us all

In just five months, the climate of hope that accompanied Jacques Chirac's presidential election victory has given way to one of sombre disappointment. The consequences for France, and for Europe as a whole, could be severe indeed.

Yesterday's strikes look like a routine conflict over the pay packets of state employees. But what is at stake is nothing less than the future shape and direction of the European Union.

Many pitfalls lie in the way of the EU's planned launch of a single currency in 1999, but few would be more devastating than the failure of the French government's economic programme. Without French participation, it is unlikely there will ever be a single currency and the entire post-war project of ever-closer European political and economic integration would be thrown into question.

The government must wipe out the 68bn franc (pounds 8.9bn) welfare-system deficit - the gap between benefits and contrib- utions - and set strict limits on other forms of public expenditure to meet the Maastricht targets. The trade unions are warning that they will resist attempts to cut the budget deficit at their members' expense.

The dilemma for Mr Chirac and Mr Juppe is that, whichever way they turn, nothing but trouble lies ahead. If they make concessions to the unions, the foreign exchange markets are certain to wallop the franc and there would be little faith in France's ability to qualify for monetary union in 1999, at least without some creative book-keeping.

But if the government prevails over the unions and achieves its deficit reduction targets, it will have carried out its programme at the expense of an unemployment rate at or near the current level of 11.4 per cent. The markets doubtwhether Mr Chirac is willing to pay that price for monetary union, particularly since he won election partly on a promise to make jobs his top priority.

It is possible to feel sympathy for Mr Chirac, since he inherited both the Maastricht deadline of 1999 and the high unemployment rate from Francois Mitterrand, his Socialist predecessor. In the view of millions of French, however, he has changed his tune since the election. In April and May, seeking to exploit widespread disenchantment with 14 years of socialism, he talked not only of cutting unemployment but of lowering taxes, raising wages, improving public services and healing the fractures in French society.

Even to many who voted for him, it seems that Mr Chirac has reneged on his pledges. A survey two weeks ago indicated that only 33 per cent of the people were satisfied with his policies, down from 59 per cent at the time of his election.

This makes Mr Chirac the victim of the steepest fall in a president's popularity rating since the Fifth Republic's birth in 1958. Mr Juppe has fared no better and, as a result of the scandal over his housing arrangements in Paris, is suffering the added humiliation of having his honesty brought into question.

Some of the government's problems appear to be of its own making, notably the housing affair and the outcry over the resumption of nuclear weapons tests. It is startling that the president and his camp should be in such trouble so soon. The Gaullists and their centre-right allies control practically every important power centre in France. With no national elections until 1998, the Chirac-Juppe team is theoretically in a stronger position than most EU governments to pursue tough, coherent policies. Instead, they seem to have wandered into a relentlessly expanding crisis.

Predictably, the word is going around Paris that Mr Juppe's days are numbered. The scapegoating and sacrifice of prime ministers is a well- established Fifth Republic ritual. Whether it will do much to rescue Mr Chirac's policies on Europe and the economy is another matter.