Chirac orders radical military shake-up

Defence revolution: Conscription to be scrapped, industry restructured and forces slimmed to fit the post-Cold War world

President Jacques Chirac is to appear on television tonight to give details of a shake-up of the French defence sector, likely to encompass everything from the future of conscription to a thorough restructuring of the arms and equipment industries.

It had been expected that Mr Chirac would concentrate on the question of national service and the possible halving of the army's strength - options contained in a defence ministry document leaked last week to Le Monde. With the disclosure yesterday of plans to "marry" the privately owned Dassault aviation company to the giant state-owned Aerospatiale, and also to privatise the defence-orientated Thomson company, it was clear that Mr Chirac would range much more widely.

The Elysee tried hard yesterday to lower expectations, refusing all comment and insisting that no decisions had yet been taken. However, the extent and detail of information that has emerged over the past week suggest that Mr Chirac will present at least interim conclusions on all the issues covered by the seven-month strategic defence review, and that the French military is facing the sort of rationalisation that its British counterpart has by and large accomplished over the past 10 to 15 years.

The lines of thinking that have emerged so far include:

n A drastic reduction in the number of regiments and troops in the French army: the current strength of 270,000 - 130,000 of them conscripts - could be reduced to 140,000.

n A sharp reduction in the number of troops based overseas and the number of foreign bases, leaving three bases in Africa, one in the Pacific and one in the Indian Ocean.

n The switch to a professional army, with or without the retention of some form of national military or civilian service; there is a fierce political debate about the desirability of ending conscription and the possibility of a referendum on the subject.

n The rationalisation of the French defence and armaments industry to make it competitive internationally, coupled with a switch to commercial methods and priorities, if not the actual or immediate privatisation of all defence industries.

The French defence sector has been largely protected both from the adverse effects of the end of the Cold War and from commercial realities. Now military budgets are being cut to boost spending on social programmes and help reduce government indebtedness.

Yesterday, attention concentrated on the planned link-up - carefully not described as a merger or takeover - between Dassault and the state- owned Aerospatiale. The news broke with a story in the financial daily, Les Echos, that tonight Mr Chirac would announce the formation of a steering committee to study "the creation of a new group uniting the two French aircraft builders, Dassault and Aerospatiale".

The disclosure was followed in mid-morning by an announcement from the Prime Minister's office that such a committee was already in existence and would conclude its study by the end of June. Mr Chirac had reportedly met Serge Dassault, head of the family company, over the weekend and cajoled or pressed him into ending his long-standing opposition to any association with the state company.

Then came a further announcement, also from the Prime Minister's office - intended, perhaps, to prevent yet another embarrassing leak - that the state-owned Thomson company was to be privatised, "between now and the end of 1996". The announcement concluded with an assurance that the state would "be careful to ensure that the interests of national defence were respected".

There were differing assessments of the implications of all this. Experts in Paris agreed that they showed the government embarking on a much-needed rationalisation of the industry and welcomed signs that France might in time treat it as subject to the same commercial constraints as any other.

There was some concern that the changes at Aerospatiale and at Thomson (where the chief executive was replaced by the former head of France Telecom, Marcel Roulet) might be designed to preserve the national aspect of the companies and curb potential for international joint ventures of the sort that British companies are interested in expanding. German observers were unworried, arguing that a more commercial approach by French companies could make them better partners for Germany's private defence contractors.

France's move towards a more commercial approach has also to be seen in the context of the huge losses sustained by France's state-owned defence industries. Big 1995 losses were recently announced by the arms and tank manufacturer, GIAT, as well as an accumulated debt of 12bn francs (pounds 1.55bn). A report on the state of the naval supplier, DCN, last week, concluded that rationalisation was urgently needed, but no decision has yet been announced.