France, P.M. lose the price war

Press, 29 September 1979, Page 16

France, P.M. lose the price war

By ROBIN SMYTH in Paris Faced with an inexplicably steep rise in the price of fruit and vegetables is August, French shoppers were on the verge of revolt. But in France the verge is as near to revolt as the consumer ever gets. The housewife sighs but pays. The resignation of the shopper ' and the tacit agreement among shopkeepers not to undercut one another are being singled out in France as among the main reasons for the failure of the economic programme of the Prime Minister (Mr Raymond Barre) to achieve the high aim he set for it three years ago. It was a melancholy but defiant Mr Barre who appeared on television to show that he was not running away from the sour reception in the press of his third anniversary in power. He had introduced a small reflationary package to modify the heavy downward turn in an economy threatened by a 58 per cent rise in oil prices. The new measures gave some much-needed help to the lowest earners.

When Mr Barre was presented by President Giscard d’Estaing as economic saviour in 1976. he announced a three-year plan to cure inflation. This, and the defence of the franc, were his main goals, followed by the modernisation of French industry and a strong export drive to bring the trade balance out of the red.

Three years later inflation is running at around 11 per cent — higher than the figure that Mr Barre came in to cut. Even excluding the impact of the oil price rise this autumn, the cost of living index shows no improvement.

Mr Barre’s critics say that the franc has lost ground against all the main currencies, apart from the sick dollar, even ending up behind the once-derided pound sterling. The trade balance, al-

though out of the red. remains precarious. Budget deficits, which were supposed to have been ended, grow even larger. The price of this bid to restore France’s economic health has been record unemployment of 1.4 million. Mr Barre has forecast difficult months ahead, and the trade unions have combined forces to fight the Government’s austerity programme. One miscalculation that is being held against the Prime Minister was the decision a year ago to start removing three decades of price controls from industry and commerce.

The idea was that cleansing winds of competition would blow through the country’s antiquated price structure. But in commerce the experiment has been a disappointment and plans to free more prices have been shelved. The conservative “Le Figaro” concluded in a front-page story that French shopping streets were not ready for American liberal habits of buying and selling. A survey of bakers, cleaners, garages, and hotels which are no longer held by price controls showed, according to “Le Figaro,” that “for the most part they just dtfn’t want to know about competition.”

One of the newspaper’s reporters found that shopkeepers were unwilling to admit that others in the same line were their rivals. Shoppers accepted the marked-up prices. As they were not prepared to go out of their way in search of a bargain, shopkeepers had no incentive to provide one.

The kinder critics of Mr Barre admitted that it was difficult to see how he could have done better, given the upheavals of the world economy since he

took over. Mr Barre said that he found the criticisms either comical, because ’ they were contradictory, or saddening. He said that during his economic programme French living standards had continued to improve, the trade balance had moved out of the red, the country's reserves had been built up and industrial production had increased. But there seemed a hint of desperation in his charge that those who attacked his record were denigrating the efforts of French citizens to restore their country’s economic health.

“Men come and go, but France remains. . .” he told his television interviewer.

There is now increased speculation that Mr Barre might go when President Giscard looks around for a more appealing economic policy .before entering , the presidential election campaign of 1981. — O.F.N.S. copyright.