Beyond France's economic jitters --'plus ca change'

The election of Socialist President Francois Mitterrand has given France the economic jitters. The French franc fell May 12 on the foreign exchange markets to 5.505 francs to $1 -- its lowest level since a devaluation in December 1971. It has dropped some 20 percent against the dollar since the start of the year. Many stocks have lost from 14 to 19 percent of their value on the Paris stock exchange since last Friday.

"The election puts a great big question mark over everything economic and financial," said J. Paul Horne, European economist for Smith Barney, Harris Upham & Co., in Paris. "The optimism on the outlook for the French economy for the next five years has evaporated."

But the change for France, though substantial, is probably not so great as many foreigners might imagine. For instance:

* On nationalization. The Socialist Party campaigned on the basis of nationalizing the private banks, insurance companies, and at least 10 of France's largest industrial companies.

But Yves Laulan, chief economist of Societe Generale, a state-owned bank, notes that "France is already a very much nationalized economy."

In banking, for instance, the government already owns the nation's largest banks, such as Credit Agricole and the so-called "Big Three" -- Banque Nationale de Paris, Credit Lyonnais, and Societe Generale. These account for all but 9 percent of deposits.

Nonetheless, some privately owned banks, such as Credit Commercial de France, the Suez Bank, and Banque de Paris et Pays-Bas, remain especially important in financing private industry. They have large holdings of the stock of some major corporations.

Nationalization would require approval of the French parliament. It remains to be seen whether parliamentary elections June 21 and 18 will provide the Socialists with a majority. With the present center-right majority of some 280 seats to slightly more than 200 opposition votes, it will take a substantial swing to give the Mitterrand bloc a majority and prevent something of a political stalemate.

If the Socialists do get that power, there is a widespread suspicion that Mitterrand will not seek to fulfill completely his nationalization campaign pledges.

If the government is unable to obtain the votes needed for nationalization, it can influence the credit policies and directions of private financial institutions through an existing system known as the "framing of credit." This spells out the amount of credit to be provided the various sectors of the economy in the year ahead.

* The economy. Mr. Mitterrand will attempt to step up the pace of the economy in order to reduce high unemployment levels.

Though he has promised consultation with the trade unions and the major employer organization (Le Patronat), he is expected to increase the minimum wage some 30 percent. He says he doesn't want higher level wages to go up so much.

He is also expected to boost family allowances and pensions. Further, he has promised subsidized loans to industries in trouble (chemicals, steel, an autos) to save jobs and small- and medium-sized companies.

This extra stimulus is expected to push inflation up to perhaps 17 or 18 percent inabout a year. The current rate is between 11 and 13 percent.

* Social measures. Mr. Mitterrand has spoken of a 35-hour workweek, higher social security benefits, and a tax on wealth.

He has promised he will not impose the 35-hour week on industry as a whole, and may not be unhappy if no great progress is made, considering the potentially inflationary impact of a shortened workweek.The wealth tax, if approved by the legislature, would amount to 0.5 to 0.8 percent of savings of more than $600,000 -- not a confiscatory amount. Social security payments and payroll contributions would go up -- but notmuch different than in the US.

Said a top banking executive in a telephone interview: "It is a big change. But you shouldn't make it too big. France is an old country. We will make it [ change] by steps. Of course, it will be difficult. There will be social unrest. But it is always difficult when you have change."