French jitters as market takes tumble

THE French franc and the Paris stock market took a tumble yesterday while under the government came attack from both ends of the political spectrum, increasing the despondency in the economy.

The franc slid to a five month low against the deutschmark before recovering, amid rumours of Bank of France intervention, to end the day in London only marginally down.

Panes stocks were harder hit, with the benchmark CAC 40 index tumbling below the psychologically important 2,000 level to close at 1,977.56, a loss of 1.27 per cent.

There was also bad news on the public spending front when Mr Jean Marie Spaeth, chairman of the Caisse Nationale Assurance Maladie, the national healthcare agency, predicted in a newspaper interview that the 1996 social security deficit would be between FfR50 billion (£6.08 billion) and Ffr5 5bn.

There seems to be little relief in store for Prime Minister Alain Juppe's increasingly jittery government. Unemployment figures could set a new record and next week's second quarter gross domestic product figures are expected to reveal little if any growth.

The government is setting much store by an upturn in economic growth in the second half of this year and beyond to enable it to cut its general financial deficit to 3 per cent of GDP in 1997 in line with the Maastricht convergence criteria for monetary union.

Both Mr Juppe and President Jacques Chirac felt obliged to reiterate yesterday that the franc would participate in EMU from the scheduled start date in 1999.

Mr Chirac is to travel to Bonn on Sunday for the latest of his regular meetings with Germany's Chancellor Helmut Kohl. The Elysee last night described the get together as a "regular consultation". It was "not at all" a crisis meeting.

With thousands of farmers blockading roads across France, Mr Marc Blondel, secretary general of the Force Ouvriere trade union, sought to keep up the pressure on ministers, saying the current situation in France was "fairly comparable to 1995".

The gloom was further underlined by a survey for the weekly magazine Le Point, which found that 77 per cent of voters thought the economy was deteriorating, with 62 per cent believing it would continue to do so.

Nearly seven out of 10 thought unemployment would worsen, with the same proportion expecting a wave of strikes similar to the one that all but paralysed the country in November and December 1995.