This was the centrepiece of his campaign for the presidency, his main preoccupation at the G7 summit in Halifax, Nova Scotia in June, and at the core of the new budget put together under the direction of prime minister Alain Juppé.
But tackling the jobless problem - at 12.6 per cent of the work force it is the highest in northern Europe - means running a looser fiscal policy than is desirable. It will also mean lowering interest rates.
These expansionary actions might well mean sacrificing the Maastricht single currency criteria, even though French policy in the late Mitterand years was largely driven by the need to maintain the Deutschemark-French franc link as a prelude to the single currency.
The most obvious way of dealing with the fiscal deficit, projected as high as 6 per cent of gross domestic product this year, is to follow the example of the German and British governments over the last two years and impose swingeing tax increases on a scale designed to reduce the deficit to 3 per cent of GDP as required by Maastricht.
France could also take a leaf out of the book of its EU partners in Britain and Germany - at the same time underpinning its Gaullist/Conservative credentials - by speeding up a privatisation programme which was necessarily timid under the Mitterand regime because of fears of a backlash by public sector unions and the peculiar cultural fondness for public sector ownership in France.
Moreover, there must be concerns -Êeven for a more privatisation friendly Chirac administration - that preparing overmanned state enterprises for privatisation could actually increase unemployment and alienate voter support for the new administration.
Chirac has an enormous advantage over his predecessors in seeking to tackle France's deep-seated unemployment and budgetary problems. The pessimism over unemployment has all but evaporated with his arrival in power and the president has won acclaim for bringing an unemployment summit to France (a follow up to the 1994 jobs summit in Detroit) early next year. Amid the confusion and vacillation over global economic policy in Halifax, Chirac was seen as delivering something positive.
The government is offering improved job subsidies for the young and long-term unemployed, a rise in the minimum wage by nearly 4 per cent, and the advocacy of higher wage levels in the private sector. The Chirac/Juppé leadership believe these measures would help to fuel a consumer-led recovery which will enable the government to bring jobless rates down more rapidly than would otherwise be the case. However, it would also mean sacrificing tough policies which have kept the French inflation rate, presently at 1.8 per cent, below that of its European neighbours.
The dash for jobs brings with it considerable risks. The broader economic background is fraught with problems. Investment spending in France has been weak, although there is the possibility of a rebound now that the political uncertainty of Mitterand's last days at the helm has been resolved.
This will also mean reversing falling business confidence and raising capacity utilisation which has been low. The risk is that increased consumption will damage the trade balance, which has been in surplus, weaken the commitment to fiscal restraint and endanger the 'franc fort' policy.
Perhaps of even more concern - particularly to the Euro-architects in Brussels - is the impact of the Chirac economic strategy on France's fiscal policy. The financial markets are beginning to worry that the budget deficit, which has been running at 6 per cent of gross domestic product for the last two years, could remain there this year before dropping in 1996. Private sector forecasters are projecting a deficit of 4.2 per cent of GDP in 1996- 7, still above the Maastrict requirement of 3 per cent.
The Chirac team may be able to buy itself time on the deficit until higher taxes can be brought into play by increasing the pace of privatisation. The opportunities are certainly there. Alain Juppé's government already has earmarked the publicly owned steel group Usinor-Sacilor, Europe's largest steel producer, for sale with a price tag of FF14 billion (£1.8 billion).
The company is to be sold complete with a pre-negotiated package of job guarantees. This was critical in France where former premier Edouard Balladur's flirtations with privatisation brought some 50,000 public sector workers onto the streets of Paris. If the threshold has been crossed the question then is, after the steel industry, what next?
The next most promising possibility is Renault, currently Europe's most profitable car company, followed by the oil company Elf Acquitaine, and a stake in France Telecom. However, other larger public enterprises include Credit Lyonnais, the bank which has just been bailed out, and the troubled computing firm Bull.
In many ways Air France looks a stronger possibility. The potential for turning round state-owned airlines in the private sector has been admirably demonstrated by British Airways in the UK and Lufthansa in Germany. Despite rationalisation, which has markedly shrunk Air France's route operations, the carrier is still struggling to show a path to profit if it were to be floated.
Nevertheless, the need for the Chirac government to square the circle by bringing down unemployment, cutting the budget deficit and meeting the Maastricht criteria may mean that the current administration - flush from election victory - will tread where its predecessors dared not.
In the view of some French political observers, the grave state of public finances and the commitment to the EU, demand that the new Gaullist government challenge France's commitment to public ownership by rapidly pushing forward the frontiers of privatisation. It would be an important political gesture but more significantly would produce much needed revenues until the budget can be more permanently balanced.
Source: Airline Business
