Fri, 20 Oct 1995

Chirac's troubled start

Jacques Chirac's presidency of France began last spring with a burst of energy and high public expectations. But the initial mood was deflated when the new government could not deliver on its beguiling campaign promises of swift and painless economic revival. Chirac, whose term runs until 2002, still has plenty of time to turn things around. But he needs to begin making the tough economic policy decisions he evaded as a candidate and in his first few months.

Nobody, least of all someone with Chirac's long experience in government, should have believed it would be possible to slash unemployment, reduce taxes and sharply lower budget deficits all at the same time. The new government tried to pursue these conflicting objectives, but the result has been a frustrating stalemate.

So the solid majority support Chirac enjoyed in May has evaporated. Prime Minister Alain Juppe has sunk even lower after barely escaping prosecution for providing his family with city- owned apartments at below-market rents in his former job as deputy mayor of Paris. The Juppes must vacate their apartments by the end of the year to avoid formal charges.

As Americans well know, politicians everywhere love to court voters with promises of tax cuts and balanced budgets. But when the same voters protest reductions in services and entitlements, politicians tend to back off, leaving deficit reduction for another day.

In France, however, such procrastination is no longer possible because of strict European Union requirements that France cut its budget deficit almost in half by 1997 to qualify for entry into the planned European Monetary Union. Joining the monetary union is the centerpiece of French European policy. But the deficit target cannot be met without unpopular cuts, unpopular tax hikes or both.

Two months ago, Finance Minister Alain Madelin proposed cutting civil service pensions and was forced to resign. More recently, Juppe announced a public-sector pay freeze, which was greeted last week by a national work stoppage. Unions also fiercely oppose any reduction in France's traditional five-to six-week annual vacation. The government could strengthen its hand by pushing ahead with public-sector deregulation. But it hesitates, fearing a political backlash.

Similarly, unemployment, the most potent issue in French politics, cannot be greatly reduced without sacrifices by those now employed. In an integrated global economy, it is not possible to sustain uncompetitive wage and benefit levels without paying a huge price in deficits or jobs. Like his predecessor, Francois Mitterrand, Chirac is learning that France's ability to indulge in populist economics is sharply constrained by the more orthodox policies of its main European partners.

Chirac has a deserved reputation for obstinacy in day-to-day battles. But in his long career he has also demonstrated that he can learn from past mistakes and sharply change course when necessary. That is what he needs to do now.

-- The New York Times