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Country Commercial Guides FY 2000: France Report prepared by U.S. Embassy Paris, released July 1999 Note*

CHAPTER III. POLITICAL ENVIRONMENT

A. Bilateral Relationship

France and the U.S. are long-standing, close allies, as witnessed by the recent Kosovo crisis. Despite occasional differences of view, the U.S. and France work together on a broad range of trade, security and geopolitical issues. In general, the U.S. and France agree on strategy, even if they may differ on tactics.

B. Political System

France is a democratic republic whose political system is based on a written constitution which was approved by referendum in 1958. According to the French Constitution, the President of the Republic is elected by direct suffrage every seven years. The President presides over the cabinet, commands the armed forces, and concludes treaties. He is also empowered to dissolve the National Assembly and, in certain emergency situations, may assume full power. The President appoints the Prime Minister, but because France's political system is a hybrid of presidential and parliamentary elements, the composition of the National Assembly (the lower house of the French parliament) determines the party or political grouping from which the President must choose his Prime Minister. Especially in recent years, this has frequently resulted in the head of state and the head of government being from opposing parties, in an arrangement known as "cohabitation". Currently, center-right President Jacques Chirac "cohabits" with a government of the center-left that was elected in June 1, 1997. The Socialist coalition includes representatives of the Communist and Green parties and is headed by Prime Minister Lionel Jospin, former Minister of Education & Head of the Socialist Party. Jospin ran unsuccessfully against Jacques Chirac in the 1995 presidential elections.

The Constitution provides for a bicameral parliament consisting of a National Assembly and a Senate. National Assembly deputies are directly elected by universal suffrage for five-year terms. Senators are indirectly elected for nine-year terms; one-third of the Senate is renewed every three years.

The French political spectrum includes numerous political groups. Key among these, from the right to the left, are: the extreme right National Front (FN); the neo-Gaullist Rally for the Republic (RPR); the moderate Union for French Democracy (UDF); the Socialist Party (PS); the Green party; and the Communists (PCF). Other smaller parties have minimal national political impact, but exert influence on a local and even occasionally on a national level.

C. Political Events Affecting Business Climate

The current cohabitation between center-right President Chirac and Socialist Prime Minister Jospin has proceeded smoothly and enjoys strong backing from the French public. This was especially true during the Kosovo crisis, when both halves of the French executive united in favor of NATO military action and each received record high approval ratings. Competition between Chirac and Jospin has also been restrained because continued disarray among center-right parties has limited the opposition's effectiveness, thus depriving Chirac of a solid base from which to challenge Jospin. For his part, Jospin has preferred to consolidate the Socialists' record in office before turning his attention to the next presidential election. Notwithstanding municipal elections in 2001, the absence of national elections before parliamentary and presidential elections in 2002 means that both men will choose carefully their subjects for disagreement.

In the meantime, the Socialists are concentrating on implementing a domestic agenda focused on economic growth and bringing down high unemployment. Fiscal policy has emphasized meeting budgetary disciplines set forth under the Maastricht Treaty. The government has made some initial progress in lightening the tax burden on employers to stimulate job creation but has hesitated to take more fundamental structural reforms. Efforts to implement a reduction of worktime from 39 to 35 hours a week as a spur to create jobs are ongoing, with January 1, 2000 set as the date for such a reduction to take effect for all but the smallest firms. A law implementing the precise terms of worktime reduction will be debated by Parliament later this year. The Jospin government has put off reform of the pension system, mindful of the bitter experience of its center-right predecessor when it attempted to tackle this highly emotional issue. Nonetheless, the government has indicated it will turn its attention to pension reform after the 35-hour workweek is set in place.

Both Chirac and Jospin are strong advocates of European Union. They view a strong Europe as a way to strengthen France, both economically and politically. The French are also fully supportive of Economic Monetary Union (EMU), and France is one of the eleven initial members of EMU. French efforts to elaborate a detailed European plan to stimulate job creation, however, have so far been unsuccessful.

Chirac's decision in 1996 to streamline defense industries and to restructure the armed forces has led to mergers and industrial realignments among French defense firms in 1998 and 1999. The Jospin government has helped to move ahead in privatizing and merging defense industries, such as Thomson-CSF and Aerospatiale-Matra.