French franc feels the heat

Money values: Giscard pinpoints key issue and questions value of Paris's economic and foreign icon

In a miserably cold and wet November, with oil refineries barricaded by protesting lorry drivers and the public cross about the world in general and France in particular, a long-taboo subject has burst on to the political agenda. Suddenly it is open season on the franc fort, France's "strong- franc" policy, an article of faith and a totem of national dignity since well before Jacques Chirac became president.

No one is calling into question the desirability of joining EMU, but what is at stake is the value of the franc when it joins the single currency.

The argument was reopened by the former president Valery Giscard d'Estaing in a column in l'Express. Rather than conceal his remarks with a discreet headline, the magazine splashed the key question over its front cover: "Should the franc be devalued? Giscard's plan for breaking the impasse."

Mr Giscard broke not one, but two taboos. Recognising that Germany would be unlikely to agree any change in the value of the Mark against the dollar or any other currency, he proposed not only devaluing the franc by 9 per cent to trigger domestic growth but also decoupling it from the Mark, which would remove at one stroke the cornerstone of French foreign and economic policy.

The response was immediate: on international exchanges, the franc wobbled; in 24 hours it had lost two centimes against the Mark. Politicians weighed in,as though shackles had finally been broken.

Those who backed Mr Giscard's view included Philippe Seguin, chairman of parliament and anti-Maastricht campaigner; Charles Pasqua, former interior minister, and Alain Madelin, former economy minister. With President Chirac visiting Japan, even the most pro-European government ministers seemed to hesitate before issuing a rebuttal.

When an official statement came - in the form of a brief joint communique from Chancellor Helmut Kohl and the French Prime Minister, Alain Juppe, no one took any notice. The franc continued to slide, and the politicians continued to scrap. Yesterday the governor of the Bank of France, Jean- Claude Trichet, issued a statement reiterating there was no change in its policy towards the exchange rate or the Mark, but uncertainty remained.

One reason was Mr Giscard's status as a veteran player in France's Europe policy, if no longer in party politics.

As one French commentator said: "You can say what you like about Giscard, but one thing you can't say is that he is stupid." He would have been well aware of the likely impact of his words; he may even have been used by President Chirac to fly a kite.

With unemployment stubbornly increasing despite a plethora of government measures to reduce it, might the French public just be willing to sacrifice a little national pride to find a solution?