The Phony Thermometer

The first few questions thrown at French Premier Guy Mollet as he descended from a plane at Orly Field last week were about his U.S. visit. Then French newsmen got down to what they regarded as more important: What would the Premier do about the bill in the National Assembly to raise the price of milk half a cent a quart? To an aide Mollet testily commented: "How can I return from high policy talks with Eisenhower and ask for a vote of confidence on milk?"

There was only one characteristically French way to stave off such a humiliating anticlimax: the Premier called in the leaders of the dairy bloc and promised an eventual rise in milk prices, if they would not demand one now. Mollet had special reason to worry about milk; it is one of the 213 items on France's official cost-of-living index. For weeks the index has hovered around 149. The day it hits 149.1, legal minimum wages all over France will jump 5%, triggering eventual pay increases for about twelve million French workers.

Tennis Balls & Stewpots. In the past year France's high cost of living has gone up an estimated 8.5%. Every Frenchman feels the pinch of inflation, but the index does not show it because of Finance Minister Paul Ramadier's artful policy of "dipping the thermometer in cold water." The index is based on the Paris price of 213 commodities which include tennis balls, long underwear and iron stewpots, but do not include gasoline or green vegetables (up 33% in the past year). Seventeen times in the past ten months, as the index trembled toward 149.1, white-goateed Socialist Ramadier forced it down by devices ranging from a 20% slash in the Paris price of government-owned cooking gas to abolition of the tax which Parisians pay for street cleaning and trash collection.

Successful as these manipulations were in stalling off the dreaded wage increase, they have cost the government an estimated $195 million a year, in increased subsidies and lost taxes, at a time when the government needs every franc it can lay hands on. In just over a year, excessive consumption of imported raw materials--aggravated by the post-Suez necessity of buying U.S. "dollar oil"--has cut French gold and foreign-exchange reserves from $1.7 billion to $934 million. Between the Algerian war (daily cost: about $3,000,000) and increased old-age pensions, this year's national budget shows a record $3.5 billion deficit.

Half Frozen. The usual remedies for such difficulties are to cut expenditures or raise taxes. Instead the Socialist government has chosen an easy way to manage its debts. Two weeks ago, to help finance oil imports, a group of French banks negotiated a $100 million loan from a U.S. syndicate headed by Chase Manhattan Bank. Last week Ramadier himself introduced a $285 million government bond issue on terms so generous that it will cost the government $20 million a year in interest and bonuses, and investors lucky enough to hold the first bonds retired stand to earn a fat 15% on their money.

Understandably irritated by a policy which freezes wages but not prices, French workers have launched an ominous series of strikes, in one of which some of the Finance Minister's own employees marched down the rue de Rivoli chanting "Hang Ramadier." Inexorably, the day is approaching when, if they want to keep their patient healthy and happy, Drs. Mollet and Ramadier will have to do more than ease his distress with a phony thermometer.

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