Turmoil in Paris as minister is forced to quit

MARY DEJEVSKY

Paris

The three-month old French government appeared to be in turmoil last night after the Prime Minister, Alain Juppe, requested - and got - the resignation of Alain Madelin, the Finance Minister and number three in his government. President Jacques Chirac was said to have supported the decision.

In a clear attempt to limit the damage, Mr Madelin's successor was announced within hours. He is Jean Arthuis, Minister of Economic Development and Planning, but his stature and following are nothing like that of his predecessor.

The immediate reason for Mr Madelin's resignation was a series of remarks he had made the previous day about the need to re-examine the privileges accorded to public sector workers in France, remarks which were met with fury yesterday by one trade union after another. He had also asked whether it was "normal" that a couple with two children on benefits should receive more than a similar couple on the same landing who "get up early in the morning and get home late in the evening after a hard day's work at the minimum wage". But his departure follows a series of behind-the-scenes arguments on priorities in economics policy, most of which he has lost.

According to a source close to Mr Madelin, his resignation was requested "in order to restore the coherence of the government". This appeared to be shorthand for saying that at the current stage, when sweeping reforms of social provision are being mooted, neither President Chirac nor his prime minister could afford to alienate the powerful public sector or the trade unions. The remarks related in the first instance to pay and conditions. But Mr Madelin had also committed the sin of appearing to associate Mr Juppe with his views, saying: "The prime minister, and I agree with him, will want to pose a number of questions in the near future, and call into question a number of advantages that have been won and a number of bad habits of ours."

He had gone on: "If you want to lower taxes, you have to lower spending", and said that there was an "injustice" in France between "those in the protected [public] sector" and those in the "exposed [private] sector". He referred specifically to the pensions enjoyed by public sector workers, noting that they had only to work for 37 and a half years to qualify, while private sector employees had to have paid contributions for 40 years.

In announcing his acceptance of Mr Madelin's resignation, Mr Juppe said sharply that it was "not by denouncing social gains that you can increase solidarity" and warned: "you must not confuse the battle against privileges with the question of social gains."

He added that a priority for his government was to proceed with change in a responsible, unprecipitate manner and that he would launch the "broadest possible discussion" before taking any decisions' on reforms.

Mr Juppe is due to meet trade union leaders for a series of pre-budget discussions in 10 days' time, and is clearly concerned not to rock the boat.

Before his appointment, Mr Madelin had made no secret of his preference for a set of policies that could be broadly described as "Thatcherite". He favoured sound money, cutting, or at least controlling, public spending to reduce France's 300bn franc (pounds 40bn) annual budget deficit, privatisation of nationalised industries, and reducing income tax and the social charges that employers must pay for each employee. He was also believed to be not averse to allowing the franc to fall against other European currencies if that helped the domestic economy.

During preliminary discussions on the 1996 budget, Mr Madelin had proposed cuts in the number of government employees, a public sector wage freeze, slashing expenditure on defence procurement, and cuts on the upper rate of income tax - if not at once, then to be promised for 1997.