42 SOCIAL SCIENTIST
wage increase paid out to get the expansion under way, these huge deficits have resulted in runaway inflation. The inflation rate in France has crossed 14 per cent a year, at a time when contractionary policies have slowed down inflation in most other countries. Inflation in West Germany, for example, is about a third of that in France. The net result is that the French market which the Socialists in their nationalist turn of phrase had planned to 'recapture', has become an easy target for foreign manufacturers. The inevitable has happened. France's trade deficit daring September 1981to February 1982 stood at 40 billion francs, twice that during the previous six months. The 1982 deficit is expected to be higher than last yearns 60 billion francs despite the devaluation of the franc by 8 per cent in October 1981. And while President Mitterrand was preparing bis blue print for recovery to be presented at the Versailles summit, the franc was taking a beating on foreign exchange markets. Even a sharp hike in French interest rates, a policy that the Socialists abhor, could not lift the franc from the low levels it had reached, vis-a-vis the dollar, forcing the government to devalue the franc by 10 per cent in the second week of June, and declare an austerity package a week later.
The austerity package announced by President Mitterrand includes a four-month freeze on prices and wages (to be followed by an agreement between the unions and industry to keep both in check) and a possible 20 billion franc cut in public expenditure. Clearly, under capitalist conditions, a prices and incomes policy involves a decline in the living standards of the workers. In fact, in this case, wage earners will also be adversely affected by the government's decision to cut the estimated 40 billion franc deficit in the social security system's account. They will have to accept smaller increases in benefits and share the burden of heavier contributions. All this ostensibly will help limit the deficit to a proposed 3 per cent of GDP, and halve the current inflation rate during the rest of 1982, so as to bring down the annual rate to 10 per cent.
What is going to make Mitterrand's attempt at implementing this package difficult is the fact that efforts at expansion have yielded little so far. Domestic growth is now projected at 2,2 per cent for 1982 as against the earlier target of more than 3 per cent. Unemployment has continuously increased after Mitterrand came to power and is expected to touch 2.1 million (8.9 per cent of the labour force) by the end of the year. And runaway inflation has always posed a threat to real income:?. This performance has already begun to tell on the Left government's social support. Besides the victory of the conservatives in the bye-elections to four seats in the general assembly held in January this year, they also scored electoral successes in 58 out of 93 of the departmental assemblies in the cantonal elections. And the current wage freeze is bringing the government into direct conflict with what it hoped would be its main social base—the French working