Ruling Party in Trouble Despite Recent Economic Gains : Upturn in France Unlikely to Help Socialists

PARIS — By most objective standards, the economy of France is now rising from its doldrums, but this change of fortune seems unlikely to help the Socialist Party keep control of the National Assembly in parliamentary elections this Sunday.

The polls show that the economy is doing better than most French think. The upswing has been marked enough to help make the conservative opposition parties change some of their pitch. They are less insistent now than before about turning the Socialist government’s way of handling the economy upside down.

Most statistics were improving even before the price of oil and the value of the dollar plummeted. These have become an added bonus, likely to push inflation down to a minimal rate.

There are still major problems. Unemployment is extremely high, one of the highest rates in Europe, a situation that is galling to a leftist government that came to office in 1981 promising more jobs. But economic growth is somewhat up and inflation well down, and most analysts are optimistic about the economy in general.

During the campaign, President Francois Mitterrand acknowledged that there was much to be done in modernizing France’s outmoded industry and retraining its workers in modern technology. “But we have lifted the French economy,” he said. “It was not easy.”

Mitterrand also insisted that the opposition’s proposals of easing government restrictions to revive the economy were really “a program of the rich against the poor, the privileged against the people, the privileged against the workers.” Although the conservatives denounced this rhetoric as outdated class warfare, they also have talked less and less in the closing days of the campaign about their program of lifting price and exchange controls, cutting taxes and selling 30 government-owned banks and companies to private buyers.

Political analysts believe that many conservatives, concerned about the divided government likely to come out of the elections, see no point in a future conservative premier getting into a running battle with a Socialist president on economic issues at a time when the economy is in relatively good shape.

Nevertheless, the conservatives are not shy about deriding the Socialists as poor managers who have run the economy into the ground in the last five years. In a recent campaign speech, former Premier Raymond Barre said the country was “a stagnant France on the decline, an impoverished and worried France, sapped of its strength by the cancer of unemployment.”

The Socialists have a major problem in trying to dispel their image. They came to office in 1981 determined to go their own way, defying the trend in the rest of the world by expanding the economy, augmenting the benefits to labor and nationalizing a large number of banks and other companies.

The strategy failed, increasing inflation and the budget deficit, making the Socialists look like bumblers. Within a year, the Socialists turned around completely, switching to an orthodox austerity program. After climbing for two years, purchasing power suddenly dropped.

Austerity alienated many traditional leftist supporters while gaining few converts from others furious at the Socialists for their early mistakes. Now austerity is beginning to work, but success may have come too late.

Inflation, which had climbed to 14.1% in 1981, dropped to 4.8% last year. The government originally predicted that it would decline to 2.5% this year. But Premier Laurent Fabius said recently that the cuts in the worldwide prices for oil made it probable that 1986 would end with an inflation rate of 1.5%.

Growth has been meager throughout the Socialist government. The gross domestic product rose only 1.5% in 1985. But there was a bit of a boomlet in the last three months of the year, during which the economy expanded at a rate of 3.5%. Experts expect a rate of at least 2.5% for all of 1986. In any case, the growth rate for the last five years has been higher in France than in West Germany and for the average of the European Common Market.

The government has made only little headway against unemployment. There was a drop of 89,000 in unemployment in 1985, largely because of government work programs for youths. But France still had 2.3 million--10% of the labor force--out of work at the end of the year.

In other economic indicators, the balance of trade has improved considerably and, as a result of the drop in the price of oil, may have a surplus in 1986; prices on the Paris stock market have skyrocketed; purchasing power has increased again; foreign debt has declined slightly, and industrial production has increased.