Word: franc
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...retrenchment, the international economy appears to be no closer to a robust recovery than when the agony began. Indeed, for many countries the problems are intensifying, and governments that have tried to expand their economies while others were battling inflation are rethinking their policies. Rocked by a falling currency, France slapped a four-month wage and price freeze on its economy and devalued the franc by 10%. Beset by near record interest rates and high unemployment, Canada unveiled an austere budget that would limit salary increases for its federal workers to 6%, or about half the rate of inflation. Faced...
...board agreed that Western European leaders have little choice but to continue their anti-inflationary policies. France's go-it-alone attempt during the past year to attack unemployment through an expansionary economic policy ended embarrassingly last month in the devaluation of the franc and the establishment of wage and price controls...
...matter matter how political leaders may try to disguise it, the devaluation of a nation's currency always reflects an embarrassing failure of economic policy. President François Mitterrand was warned by his advisers a month ago that the feeble French franc's pegged level within the European Monetary System could no longer be defended on world currency markets. Yet his pride kept him from admitting this painful reality until after the seven-nation Versailles summit conference. With its lavish displays of fireworks, fountains and nonstop pageantry, that diplomatic spectacular may in many ways have represented Socialist...
...damage inflicted on the franc springs mainly from an inflation rate that clings stubbornly around 14%, vs. 6.6% in the U.S. or 5.6% in West Germany. Even as French competitiveness on world markets has deteriorated, the pickup in industrial production promised by the Socialists has failed to materialize. More than 2 million French, 8.7% of the labor force, are unemployed, a rise of 15% since Mitterrand took office. Inevitably, the franc has come under attack as confidence in Socialist economic management has dwindled. Since March, France's central bank has spent about $8 billion to support its currency, leaving...
...franc's plight has been aggravated by the persistent strength of the dollar. As high U.S. interest rates draw funds into greenbacks, the dollar last week rose to its highest against the Japanese yen in several years, and set postwar records against the French franc, Italian lira and Canadian dollar. According to a closely watched indicator published by the Morgan Guaranty Trust Co., the dollar's trade-weighted value is now higher than it was in 1970. Fulfilling an agreement reached at Versailles, the Reagan Administration last week broke with its free-market doctrine, selling dollars in foreign...