Inflation Problem In France

Press, Volume CII, Issue 30231, 9 September 1963, Page 13

Inflation Problem In France

(N.Z.P. A.-Reuter—Copyright) PARIS, September 8. France faces a “credit squeeze” by the banks and restrictions on hire purchase buying as part of an austerity campaign after five years of booming business and uninterrupted rising prosperity. The Finance Minister (Mr Valery Giscard d’Esbaing) this week-end is putting final touches to an anti-inflation plan which will go before the Cabinet tar approval on Wednesday. The plan will be published and commented on by the Finance Minister on Wednesday afternoon. President de Gaulle may broadcast about it a few days later. But advance information indicates that the most spectacular features of the plan will include a cut in military service from 21 to 18 months and credit restrictions which

will apply not only to banka but also to retail consumers. With toe continued rise in prices—toe cost of living has risen by 6 per cent over the last 12 months—-buying on the “never-never” has increased greatly in France. Hire-purchase is to be curtailed in order to bring down prices of motor-cars, washing machines, refrigerators and other household appliances. One of France’s moat distinguished economists, Mr Jacques Rueff, toe man behind toe 1958 stabilisation of toe currency, compares the present situation to that of the man who is passing the fifth floor, after having fallen off toe eighth, saying: “So far all Is going well.” Prices have been rising steadily over toe last two years. Wages have risen at an even greater rate. The authorities consider it high time to put on the brake if toe stability of the currency—toe backbone of

France’s boom—is to be preserved. There is, however, no question of a new devaluation.

Ministry of Finance officials point out that a tendency towards mild inflation ia inevitable with full employment and France has what toe economists call overemployment.

Production continues to expand, and foreign trade has practically doubled since Resident de Geulte returned to power in 1958. In two years prices have increased by 13 per cent. lit Italy toey have risen by 18 to 17 per cent and by 8 per cent in West Germany and re Britain. In Belgium and the United States prices have only risen 3 and 2 per ceuS respectively.

But France's rate of increase in all-over production is 8 per cent, the highest inside toe Common Market and well ahead of Britain and toe United States.