France loses its balance: LEADING ARTICLE

It was Budget day in France yesterday and the package, aimed at the twin scourges of chronically high unemployment and the fiscal deficit, will not have done much to calm nerves.

France's composure has been shaken by international outrage at its nuclear tests in the Pacific and a campaign of bombings at home, apparently carried out by Islamic terrorists. Against a background where almost one in eight of the workforce is out of a job, no wonder the political mood is brittle.

How France deals with these problems is pivotal for European politics. If France falters in its appetite for ever greater European integration, then the entire European Union engine will stall. That would have profound significance, not least for British politics in the approach to the next general election.

For most of the post-war years, France has comfortably conflated its sense of European vocation with a narrower concept of national interest, seeing no contradiction between the two and, indeed, actively promoting the idea that they were synonymous. This has become an increasingly difficult trick to pull, as the narrow approval of the Maastricht treaty in 1992 showed.

Now European reactions to its nuclear tests look, through most French eyes, like a lack of solidarity from its European partners. Tensions have also been fuelled by growing opposition inside France to the Schengen treaty, which is supposed to remove the barriers to free movement of people between member nations. As France expresses fears about the risk of more imported terrorism, other countries worry that Paris is losing its European nerve.

This is to overstate the case. Part of the explanation of recent events is a revival of Gaullist chauvinism, for which President Jacques Chirac feels he has a still fresh, if slender, mandate.

However the shift in French thinking about Europe goes back before Mr Chirac and is rooted in a crisis of French nationalism. This has causes that are familiar in the post-colonial, post-Cold War world and which have sown confusion in British as well as French politics.

For France's friends, notably those in Bonn and Brussels, the answer does not lie in rhetorical declarations about forging towards an ever- closer EU, nor does it lie with the application of external pressure to force France to comply with its obligations.

This does not mean that Paris has an absolute veto in Brussels or that all of the cruder nationalistic utterances of the Gaullists should be taken seriously. But it does mean that French concerns are pivotal in the pursuit of further economic integration in Europe and in the more urgent task of bringing order and coherence to Europe's security arrangements.

France faces difficult choices. It has stuck, through very hard times, with an exchange rate linked to the German mark, and is paying a high price in unemployment. There is no sign that the will of the political class has weakened on this strategy, which is critical to the prospects for monetary union. On defence issues, France has moved closer to its partners, but not yet close enough.

President Chirac's first months in office have hardly been reassuring for those anxious to restore momentum to the process of European integration. Further patience is needed.