President Francois Mitterrand appeared tonight to be moving toward a package of new austerity measures for France after a week of struggle within his Socialist government and open conflict with West Germany over exchange rates.
The new economic measures, which are likely to be combined with a major government reshuffle, are designed to cut France's crippling trade deficit, which amounted to nearly $13 billion last year. But they have assumed an added urgency because of speculation against the franc in European money markets following municipal elections here and general elections in West Germany.
Mitterrand set a deadline for clarifying the situation, since he has scheduled a televised address to the nation for Wednesday. On Monday and Tuesday, he is to meet with European Community heads of government in Brussels.
The past week has witnessed a financial poker game being played between the West German and French governments over which side should bear responsibility for an inevitable realignment of exchange rates. The Socialists here are anxious to avoid the political embarrassment of a third devaluation in less than two years, while Chancellor Helmut Kohl's newly reaffirmed center-right government insists that it will not revalue unilaterally.
The outcome could affect not only Franco-German ties and relations within the European Community but also France's future economic direction. Senior French officials have even suggested privately that it could have an impact on the shape of a new Cabinet.
The prospect of a reshuffle and the monetary dispute with West Germany have virtually paralyzed normal government activity here. The president has been closeted with his advisers, and normally garrulous ministers have been afraid to say anything in public for fear of jeopardizing their positions. The press has been full of contradictory rumors.
A Cabinet shuffle originally had been widely predicted for this week following last Sunday's final round of municipal elections. But it did not occur--apparently because the Socialists fared better than expected in the second round following a heavy defeat in the first. This increased Mitterrand's tactical room for maneuver even if the hard economic choices remained the same.
In normal circumstances, there would be no reason for essentially local elections to produce such tremors. The capture by the opposition of 31 large towns that were previously held by the Socialists or Communists has not affected the national balance of power. Taken overall, it was a predictable result, consistent with the slump in popularity experienced by most democratic governments during a period of economic crisis.
Another explanation for the present political confusion is that, after almost two years in office, Mitterrand has reached an important turning point. After pursuing a policy of economic growth for his first year in office, he was forced to authorize a severe austerity package last June. But these measures have failed to produce the desired results.
In deciding what new measures to take, Mitterrand has fallen back on his finely tuned political instincts. Among the factors that he has to take into account is his wish to keep the Communists in his government as junior coalition partners and the need to preserve the delicate balance between rival factions in his Socialist Party.
Since the municipal elections, the Communists have issued a series of thinly veiled warnings to Mitterrand not to reduce their number of ministerial seats, which at present is four. They have also made clear that they are in favor of the retention of the present prime minister, Pierre Mauroy.
At one point earlier this week, Mitterrand was reported by close associates to be intending to keep Mauroy on for six months or so to implement the unpopular austerity measures. But Mauroy apparently objected to the plan, and it is not clear whether he will go or stay.
One high-level official said today that among the austerity measures now under consideration, are proposals to cut consumption by increasing savings. He said the government was seeking to avoid protectionist measures "if at all possible."