Chirac pledges to keep in step with Germans

EMU drive: Big two plan a 'calendar for recovery'

MARY DEJEVSKY

Paris

The French and German governments are to co-ordinate measures to encourage economic recovery in their countries, and twin announcements will be made in the next month.

The move, intended to dispel doubts about the determination and ability of Paris and Bonn to realise the single European currency, was foreshadowed by President Jacques Chirac at his New Year reception for journalists in Paris yesterday and subsequently confirmed by a government source. "France and Germany," the source said, "want to co-ordinate their calendar for recovery, even if the measures announced here and in Germany are not the same."

Mr Chirac had called for measures to relaunch economic growth, including jobs, to be "coordinated at the European level, notably between France and Germany" and disclosed that he had recently discussed this with Chancellor Helmut Kohl. An almost immediate clarification from the Elysee said the measures would be subject to France's severe budgetary constraints and they would not entail any co-ordination of French and German interest rates: "The Bank of France today is independent, as is the Bundesbank."

The French-German initiative comes only days after Germany announced a sharp deterioration in its economic performance, which, if it continues, would mean it could not meet the Maastricht criteria for currency convergence by 1999, the required date. France also faces difficulty in reducing its deficit to the required 3 per cent of GDP.

Mr Chirac emphasised yesterday that in his view the Maastricht criteria were little more than markers to encourage good economic management, "requiring us all to manage our affairs well". Sound public finances, he had earlier insisted, were "the condition for a dynamic economy and national independence".

His remarks about Maastricht may have been intended partly as consolation for Mr Kohl, but also as an answer to critics in France: those who contend that the urgency of meeting the Maastricht criteria is hampering France's economic recovery, and pro-Europeans led by the former president, Valery Giscard d'Estaing, who recently attacked what he said was Mr Chirac's reticence over Europe.

Yesterday's Paris reception marked the start of the French political year, which had been delayed for a week by the death of Francois Mitterrand, and Mr Chirac used it not only to underline the continuing closeness of France and Germany, but also to offer his first cautious mapping of a policy timetable.

He said that in 1995 he had aimed to reduce the gap between revenue and spending to facilitate lower interest rates. In 1996/97, compulsory levies on income would be "stabilised" and "unjustified spending" cut. The stress would be on "cost-effectiveness". From late 1997, emphasis would be on growth and reducing levies.

This timetable suggests fiscal reform, entailing a complete restructuring of the tax system, already postponed for a year, could be postponed until 1998.

Mr Chirac also expressed pointed support for the Prime Minister, Alain Juppe, and his government. Repeating that the controversial welfare reform was necessary and would go ahead, he said one condition for it was "to have a good government and a good prime minister, and that is the case today".

Today, parliamentary committees resume their discussion of the "ordinances" that are intended to accelerate the reform measures through parliament. Tomorrow the government is expected to hammer out the vexed question of the new tax - opposed by most of the country - earmarked to pay off the debt accumulated by the current welfare system.