Chirac stands by strong-franc policy

PARIS (AFP): French President Jacques Chirac stood by the so- called strong-franc monetary policy yesterday when the government appointed two members to the monetary policy council of the central bank, provoking top-level protests.

Chirac had stressed that monetary policy should ensure "stability and continuity", government spokesman Alain Lamassoure said.

Finance Minister Jean Arthuis said that the two appointments were in line with "the objective of stability of the franc".

But the Speaker of the Senate Rene Monory, who had unsuccessfully proposed two candidates under the statutory procedure, said he "regretted" the way the appointments had been made and that he intended to propose new legislation to ensure that proper account was taken of names proposed for the council.

And the president of the finance commission in the national assembly or lower house of parliament, Pierre Mehaignerie, condemned a decision not to reappoint Jean Boissonnat, a former journalist.

Boissonnat had been one of the two people recommended by Monory against a background of renewed controversy over tight monetary policy to keep the franc strong and prepare for a single currency even though unemployment is rising.

Lamassoure said that Chirac and the government had renewed their confidence in the capacity of the monetary policy council and of the independent Bank of France to manage monetary policy on the basis of stability and continuity".

This was necessary for the French economy and "for the achievement of our European objective", Lamassoure said.

Financial markets here reacted in contrasting ways to the appointments. The franc slipped to 3.3765 to the mark from 3.3750 immediately before the announcement and from 3.3700 late on Thursday.

On the bond market the national index firmed to show a loss of 0.14 percent to 127.80 from a loss of 0.22 percent before the announcement. The CAC 40 index of leading shares firmed slightly to show an overall gain since trading began of 0.56 percent.

The government appointed Jean-Rene Bernard, 64, who is a former deputy governor of the Credit Foncier de France bank and a former president of the CIC-Paris bank, both of which were linked to the state sector.

Bernard is widely seen as being a follower of Chirac with whom he once worked as an adviser to former President Georges Pompidou.

Analysts said that it was difficult to classify him as being either for, or against, policies to keep the franc strong. He is a former ambassador to Mexico and to the Netherlands.

The government also appointed Pierre Guillen, 69, a member of the economic and social council, and, until recently, an influential member of the French employers' federation, the CNPF.

He is believed to be close to the view of the Speaker of the French parliament Philippe Seguin, a leading neo-Gaullist supporter of the government, who has been a rebel in questioning the so-called strong-franc policy.

Guillen is also said to be close to the former president of the EU Commission Jacques Delors, a socialist, and to his daughter, Martine Aubry, a former labor minister.

Both Bernard and Guillen had been proposed by the president of the economic and social council, a high-level advisory body. Seguin and Monory had each also proposed two names as required by statute.

They replace Jean Boissonnat and Bruno de Maulde for a period of nine years as members of the monetary policy council which is independent in setting monetary conditions to ensure stability of prices provided its decisions conform to overall government policy.

The government has the last word concerning exchange-rate policy and the external value of the franc.

Last month former president Valery Giscard d'Estaing revived divisions in the French establishment, and governing parties, over restrictive monetary policies and strength of the franc by arguing that the franc should fall against the dollar and possibly also against the mark.