France Faces Austerity

Press, Volume CVIII, Issue 31723, 5 July 1968, Page 9

France Faces Austerity

(N Z.P.A.-Reuter—Copyright) PARIS, July 4. Frenchmen face the prospect of 16 austere months as the nation fights to save its economy from the ruinous backlash of industrial and social strife.

The Government yesterday announced a series of squeeze measures in an effort to stave off inflation threatened by wage increases conceded after the wave of nation-wide strikes in May and June. These included a rise in the Bank Rate by li per cent to 5 per cent, a 2500-million franc rise in taxes, and tightened currency exchange controls.

The main aim of the increased rate is to stem the drain on France's gold and convertible currency reserves, which fell by 5405 million francs last month.

The increase, which will make hire purchase dearer, will help to lessen home demand for goods that industry is just starting to turn out again after a five weeks stoppage. They are goods badly needed to earn currency abroad.

The tax rise, likely to hit the middle and upper income brackets, is aimed at keeping France’s 1968 Budget deficit to 10,300 million francs. It will also be a brake on demand.

The Economics Minister, Mr Maurice Couve de Murville, told a press conference yesterday the franc would not be devalued and predicted that the economy would be back on an even keel within 16 months. He made it clear that his main concern was to prevent higher wages resulting in massive inflation. No details have been given of the tax increases or of the tighter exchange controls. The controls, introduced on May 31, at present limit tourist spending abroad to 1000 francs (SNZI7S) a head.