Paris Braces For The Right Of Spring

Last month's proposal by French Socialist leader Michel Rocard to kill off his party--following its expected rout in parliamentary elections on Mar. 21 and 28--seemed at first like campaign suicide. Instead, the ex-Prime Minister's "big bang," as the French call it, is proving a shot in the arm for France's beleaguered left. Although his own seat is in danger, centrists, greens, and Socialists are flocking to his plan to forge a new moderate party, which Rocard hopes can win him France's presidency when Socialist Fran ois Mitterrand steps down in 1995.

But Rocard's ploy won't be enough to stop this month's conservative tide. Polls still show the right winning up to 80% of parliamentary seats. Voters are tired of recession and financial scandals--and of the 76-year-old Mitterrand. His 12-year tenure now tops that of every postwar Western European leader except Germany's Konrad Adenauer. Although the conservatives have little new to offer, except privatizing state companies, the French hunger for change as Americans did last fall.

A MESSY BRAWL? What they may get instead is two years of political intrigue. On the left, Rocard will be politicking to build his new party. As for the conservative Prime Minister who takes over in April--probably Gaullist Edouard Balladur, possibly center-rightist Fran ois L otard--he'll be sparring for power with Mitterrand. Their fight may be messier than the 1986-88 "cohabitation" between Socialist President and conservative Prime Minister. This time, conservatives should have greater parliamentary weight to throw around. Already, they're demanding a voice in foreign policy, traditionally the President's preserve.

A power struggle isn't what France needs--with its economy weak and budget deficits soaring. "I'm afraid the tough decisions won't get made," says economist Eric Taz -Bernard of Banque Indosuez. Unemployment is at 10.5% and rising. Even without politics, the conservatives' margin for maneuver is slim. For example, they want to raise up to $10 billion a year for deficit reduction and priming the pump. To get the money, the right wants to privatize the dozen big state companies it failed to sell last time. They'll start with insurers AGF and UAP, and Banque Nationale de Paris. But many big outfits, such as Renault, Thomson, and Cr dit Lyonnais, will probably have to wait because the market is weak. The right also promises tax cuts for small business and wants more labor flexibility. But if conservatives press too hard on work rules, many fear that labor unions, docile under their Socialist allies, will touch off widespread strikes as they did in 1986.

MANY DOUBTERS. The most pressing and controversial issue of all is the franc. To boost sagging exports and cut interest rates, nationalistic Gaullists and some unions want the new government to devalue the currency. Balladur vows to preserve the franc's current level against the German mark as a key to France's long-term competitiveness. But money managers doubt his resolve, noting that he devalued the franc twice in an earlier stint as finance minister. Balladur also wants to remove the franc once and for all from the political stage by granting independence to the Banque de France, the nation's central bank.

The political confusion is sure to percolate beyond the March elections. The much bigger prize is the presidency, in 1995. The pitfalls are so great for France's conservatives that some fear governing may prove a trap, letting the left return in two years--as happened in 1988. That, of course, is what Rocard's "big bang" is all about.

Before it's here, it's on the Bloomberg Terminal.