[PEN-L:11055] That's what I like about democracy

[D Shniad <shniad@xxxxxx>]

The Daily Telegraph				   Friday 27 June 1997

Socialists in U-turn over £5bn sale of Telecom

	By Susannah Herbert in Paris

	France's Left-wing government plans to sell almost half of France
Telecom this autumn, backtracking on an election promise to halt priva-
tisations.
	The U-turn has been forced on Lionel Jospin, the Prime Minister, by
the need to reduce France's growing state deficit in time to meet the
deadline for joining the single currency.
	The sale will be opposed by the unions and the Communist Party -
the Socialist party's partners in government. The Communists and So-
cialists signed a declaration in April, pledging to defend "public serv-
ices" by stopping all privatisations.
	The government's policy shift - confirmed by the finance minister,
Dominique Strauss-Kahn - is linked to panic about the ballooning defi-
cit. M Strauss-Kahn told Socialist MPs this week that the 1997 deficit
was likely to be between 3.6 and 3.8 per cent of France's total output - a
far cry from the target figure of three per cent set by the Maastricht
Treaty as a condition for monetary union.
	The 50 billion francs (£5.3 billion) expected to be raised by the sale
of 49 per cent of France Telecom cannot be used directly to pay the
deficit, but will go into ailing state industries.  Thanks to a fudge de-
vised by the last government, however, the state stands to inherit a one-
off windfall of 37.5 billion francs (£4 billion) from the France Telecom
pension fund, which will be transferred to state coffers in return for a
state commitment to look after the company's pensioners. This sum -
equivalent to 0.5 per cent of France's total output - is essential if France
is to enter the single currency.
	The privatisation plan, which awaits M Jospin's final approval, rep-
resents a return to the policies of the defeated centre-Right government
of Alain Juppe, whose plans to sell France Telecom shares were inter-
rupted by the snap legislative elections. Unlike M Juppe, however, M
Jospin is expected to consult the firm's 170,000 employees.
	Yesterday, Christian Pierret, the industry secretary, said: "Lionel
Jospin has indicated that the staff will be consulted, but that does not
necessarily mean a referendum."
	The dilemma posed by France Telecom's future is simply one aspect
of the biggest challenge facing M Jospin's government: the reconcilia-
tion of his expensive campaign promises with a commitment to the sin-
gle currency that obliges him to shrink the deficit. So far, M Jospin's re-
sponse has been procrastination: he has said he will not present a budget
to parliament until November, by which time he hopes economic growth
will have picked up enough to save him from taking unpopular action.