Word: franc
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...rising by an annual rate of about 6%, faster than in any other Common Market country. Consumer costs have been swollen further by huge tax increases designed to dampen demand. Inflation has debased the currency to the point where, for the first time in years, black marketeers are selling francs for stronger money at discounts of 5% or more. The economy's weakness has so greatly affected the country's political power the French are no longer campaigning in world banking councils for an increase in the price of gold. Because the strike was brief, the French franc...
...weakest link in the chain of major currencies, the French franc is the primary source of world monetary instability. The immediate fate of the franc rides on the long-awaited wage negotiations between Charles de Gaulle's government and French labor unions. Last week, three days after they began, those talks collapsed in acrimony. French unions called a 24-hour general strike for early this week and set the stage for a showdown that could determine whether France can avoid devaluation-and whether the world can escape new monetary dislocations...
Implacable Enemies. The French labor talks were the first since last May's nationwide riots. The earlier negotiations led to wage hikes averaging about 15% and touched off an inflationary spiral that has damaged the country's trade position and weakened confidence in the franc. As last week's labor talks approached, French workers complained that price increases have eaten into earlier wage gains, and insisted on new increases of 10% to 12%. Eventually, the union leaders trimmed their demand by half. But government negotiators argued that even a 6% raise would force the franc...
Shopkeepers to the Streets. Big wage increases could put new inflationary pressures on an economy that is already severely strained. Because inflation has hindered exports and stoked domestic demand for imports, French trade deficits ran more than $200 million a month in both December and January. Devaluation of the franc would relieve the competitive imbalance by making French goods cheaper on world markets. But devaluation would also be a bitter political setback for Charles de Gaulle, who has staked his prestige on maintaining parity of the franc at 20 U.S. cents. Even so, a currency that foreigners hesitate to handle...
Dangerous Game. If labor eventually settles for increases of 4% or so, the franc will probably squeeze through. Too many concessions by the government would force devaluation. Somehow, De Gaulle must be tough enough to face down the unions but flexible enough to avoid the kind of revolutionary unrest that shook France during last spring's devastating strikes. Last week De Gaulle issued yet another "non" to both lavish wage increases and devaluation. He told his cabinet that the wage settlement offer last May was "probably too much. But what has been done is done. In any event, there...