Change? But France is Perfect

President Jacques Chirac has no more excuses. In 1997, he unwisely called early parliamentary elec­tions and then spent the next five years in an un­comfortable "cohabitation" with a socialist government headed by Lionel Jospin. But in 2002, Chirac won re­election and added a solid Gaullist majority in the Na­tional Assembly to the right's long-standing control of the Senate. He also buried the corruption scandals that have shadowed him in recent years. In brief, until 2007, when he will be 74, Chirac will enjoy all the power given to the French presidency under the Fifth Republic.

The question is: does he know what to do with it? He talks about change, everyone talks about change, but change to what?

When the French call for change, they usually mean turning the clock back to days when France was more French. What France needs in 2003 is reform of exactly the kind Chirac is least able to deliver. Less centrali­zation, fewer rules, a reduction in the cost of employ­ment (and therefore fewer benefits) and an end to unsustainable pension promises. This would mean a break-up of the French elite and a dismantling of a gov­ernment taxation system that will take 46% of the coun­try's wealth in 2003 – one of the highest proportions in the world. The truth is that France has perfected the model of the well-run, bureaucratic, socialist state. No one does it better. But it cannot last. Change is essential.

It is Chirac's job to carry out his election promises and, in most areas, his hands are tied by slow economic growth and rising unemployment. A key promise is a 5% cut in income tax followed by more reductions in the tax and social-security burden. The first cut was duly ap­proved, but at what price? Raffarin inherited a larger budget deficit than expected, one that forced him to seek a temporary exemption from European Union deficit limits. To meet the new deficit target at the same time as cutting taxes further will require reductions in public spending. And, with little economic recovery expected in 2003, that will be a recipe for trouble. The other thing to occupy him will be privatization: up for sale in 2003 will be a large chunk of the government's 50% holding in Air France. Attention may then turn to Electricite de France and Gaz de France.

Foreign affairs remain the preserve of the President. And here Chirac will face a stormy year. His toughest dilemma is navigating France's relationship with the United States. Bilateral relations are strained. The White House doubts France's reliability as an ally, while many American Jews seem persuaded that France is again gripped by anti-Semitism. Conversely, France's latent anti-Americanism has found an easy target in George W. Bush. In Europe, Chirac would like to work more closely with the German chancellor, Gerhard Schroder. But France and Germany differ on key issues, with France more wary of both enlargement of the EU and proposals to transfer greater power to Brussels. France has again de­layed reform of the Union's common agricultural policy, but it also knows that, under Anglo-German pressure, it is doomed to lose its uniquely privileged status one day.