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Global View: French politics and 50-50

By IAN CAMPBELL, UPI Economics Correspondent

on Wednesday the French prime minister, Lionel Jospin, of the Parti Socialiste, presided over the National Assembly for a final time, took his leave of it, and then, a few hours later, sent a fax. The fax was addressed to all French men and women but, no doubt for laudable reasons of economy, Jospin sent it only to a news agency, Agence France Presse. I want to be president, it said, though not precisely in those words.

Jospin's announcement was a surprise, and not just because it was made by fax. Though a presidential bid was expected, Jospin was not thought likely to announce his candidacy for some days. But he seized the day and the fax machine. The presidential race looks close; Jospin does not want to give his rivals too much of a start. And his chief rival, the current president, Jacques Chirac, of the Rassemblement Pour la République, the Gaullist party, has already said he will be running.

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It may not come down to a race between Jospin and Chirac. Jean-Pierre Chevènement, formerly the interior minister in Jospin's government, is being characterized, not least by himself, as "the third man" in the race. He is taking around 10 percent of the vote in opinion polls. His platform is Gaullist but for "those who feel betrayed by the RPR (of Chirac)." He is against the Maastricht treaty and the euro. It is possible that he will make further headway in the election race before the first round on April 21.

But polls taken on the assumption that Jospin and Chirac will contest the second round on May 5, which will pit the two leading candidates from April against one another, show an even race. According to a mid-February poll commissioned by Le Nouvel Observateur, a magazine, 50 percent would vote for Chirac, 50 percent for Jospin. This confirms the result of another poll, carried out for another magazine, Paris Match, which also gave Jospin and Chirac half the vote each. Fifty-fifty: It is a fitting score card for Jospin and Chirac, and for France.

For more than four years, Jospin and Chirac have shared power in the political "cohabitation" of left and right that has become usual in French politics. And the results, too, have been 50-50: neither good nor bad; comme çi, comme ça.

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On the one hand, France's economic performance seems reasonably good. Its economy has grown faster than Germany's. From 1996-2000 it averaged growth of 2.6 percent per year, as against just 1.8 percent per year in Germany. Friday's announcent of 2001's fourth quarter shrinkage of 0.1 percent in France's gross domestic product is still likely to leave its overall 2001 performance, growth of 2.0 percent, better than Germany's.

France has also had lower inflation than Germany but on unemployment it fares similarly (and less well than the western part of Germany) with French unemployment at 9 percent of the work force in December as against 9.6 percent in Germany in January.

The French economy has hidden strength. On productivity it scores highly. A recent report from a U.S. research organization, The Conference Board, puts French GDP per hour worked in 2001 at 101.8, with the United States at 100. Germany fares far less well, scoring 92.5. But this is still well ahead of the score for Britain of just 79.5. On GDP per head, however, the United States far outstrips France (at a score of 69.1) and indeed the European Union as a whole (at a combined score of 67.1) because Americans work longer hours. As Martin Wolf of The Financial Times points out in a recent article, perhaps this is no bad thing. Europeans work less and enjoy more leisure time. But the key point for us is that French performance in terms of output per hour worked is good.

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So France is not doing badly. Has Jospin been a good prime minister? "Yes, with reservations," says Michael Sutton, director of French studies at the University of Aston in Birmingham, England. Jospin is, Sutton says, "a solid figure with the necessary gravitas, and much of his economic policy has been more or less sensible."

But Sutton's reservations are large. Jospin's introduction of a 35-hour working week is adding to the costs of the private sector and has caused havoc in the public sector which, Sutton says, was originally not to be included in the reduced work week but which was included after union pressure.

According to Philip Whyte, senior European cconomist at the Economist Intelligence Unit in London, France's productivity performance is enhanced by the fact that the number of people employed is low, and the less skilled are without jobs. There is a need, Whyte says, to address skills shortages and create opportunity for more of the population. Labor law needs to be more flexible.

Sutton points out that measures taken last year by Jospin will not help towards the goal of increasing employment. After the U.K. company, Marks and Spencer, and the French company, Danone, slashed jobs, Jospin's government put forward legislation which will make it still more expensive for firms to cut workers. Firms that cannot cut staff will be less keen to hire them.

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Reforms to the social security system and, in particular, to health care, are needed if the fiscal deficit is to be controlled. According to the Economist Intelligence Unit, the budget for social security healthcare spending in 2002 will amount to 735 billion French francs, around 7.4 percent of GDP. This is 3.8 percent more than the estimate for the outturn in 2001 and 6 percent more than the amount budgeted for 2001. Health care costs are spiraling out of control. Something serious must be done soon.

Alain Juppé, Chirac's first prime minister, did try to force through health care and other reforms in 1995-97 but public opposition was strong and the right fared badly in the snap elections Chirac called. It was that electoral defeat which gave the Socialists control of the National Assembly and brought Jospin to the premiership. But reforms are clearly needed. Who is going to carry them out? And when?

There is multi-party agreement on the need for reform in one area. France's public sector workforce is far too big and must be cut. But so far no one has dared trim the public payroll. Sutton believes that the remedy most likely to be chosen will be natural wastage: as older sector workers retire, they will not be replaced.

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Demographics in the form of an aging population may therefore help France in one regard. But they also carry a threat, according to the EIU's Whyte. The pay-as-you-go pension system -- which, Sutton points out, is also something to be addressed, and replaced by some sort of capitalized system -- is going to come under growing strain as a smaller percentage of working Frenchmen are obliged to support a growing number of retired ones.

France needs more rapid reform if it is to keep in check its budget deficit -- likely to rise to 2.25 percent of GDP this year, in Whyte's view, not far short of the 3 percent of GDP limit set by the European Union's Stability Pact. Out of Jospin and Chirac, who might be more likely to effect it?

For both Whyte and Sutton, Chirac is "an opportunist," a man with neither firm ideology nor solid program but a love of campaigning and of the exercise of power. After an attempt at reforms led the right to electoral defeat in 1997, would Chirac try again? Perhaps he would if, after securing the presidency, the right also gains control of the assembly in June. But Chirac might easily take fright if public opposition looks resolute.

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And President Jospin, how much of a reformer might he prove to be? In Whyte's view, much would depend on the outcome of the June Assembly elections. If the left wins the elections but with a relatively poor performance by the Communists, Jospin would be more likely to appoint a centrist prime minister, such as Laurent Fabius or Dominique Strauss-Kahn. These would be as likely to address some of the necessary reforms as any Chirac appointee, Whyte believes. On the other hand, a strong performance by the Communists might see Jospin turning to a more left-wing figure, such as Martine Aubry, and the chances for reform would then be poor, Whyte thinks.

Yet under Jospin or Chirac what must be taken into account is the firm resistance of the French population to changes in the social security system, to cuts in the public sector work force, to reform of labor legislation. Some of the problems France has failed to address, or that Jospin has made worse, risk dragging French performance further down.

It will take determination to move France forward and make its performance better than 50-50. Even if the next president has control of the legislature, it is not clear the necessary determination will be there.

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Global View is a weekly column which appears on Fridays in which our economics correspondent reflects on issues of importance for the global economy. Comments to [email protected].

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