FRENCH MINISTER RENEWS ECONOMIC CONTROVERSY
French Social Affairs and Labour Minister
Philippe Seguin has renewed a controversy over whether France
is positioning itself for an economic U-turn, saying it was
possible to boost domestic demand without giving rise to
negative economic effects.
    Prime Minister Jacques Chirac's spokesman, Denis Baudouin,
on Monday sparked speculation of a reflation hitherto excluded
by the government when he said ministers were agreed on the
desirability of "relaunching the economy." 
    The Finance Ministry, however, swiftly ruled out the option
of reinflation policies to boost domestic demand, which were
tried and abandoned by the previous Socialist government.
    Earlier today sources close to Finance Minister Edouard
Balladur reiterated policy remained one of restoring sound
finances and enhancing economic competitiveness.
    But political analysts said Baudouin's statements showed
growing divisions over electorally sensitive social issues
among the rightist RPR-UDF coalition, ahead of its bid next
year to capture the presidency from Socialist president
Francois Mitterrand.
    While the government has achieved lower inflation, a better
foreign trade balance and an overwhelmingly successful
privatisation programme, unemployment has continued to edge
upwards, reaching its present record rate of 10.9 pct, with
more than 2.5 mln jobless.
    Seguin, who holds direct responsibility for dealing with
unemployment, told a press lunch, "Everything depends on what
you call reflation...One can arrive at the results of a
reflation without passing through the perverse effects of a
reflation."
    He said conservative prime minister Jacques Chirac would
announce in the next few days a package of capital endowments
for state-owned enterprises including public works and motorway
building.  And while sources at Seguin's ministry said the
package could total 12 billion francs for 1987, sources close
to Balladur, making no mention of public works, said only 8.6
billion francs had been set aside for capital endowments.
    Seguin said the advantage of public works was that they
were non-inflationary and had a fast job-creating power.
 REUTER
