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An `Iron Lady' Across The Channel?


International Business

AN `IRON LADY' ACROSS THE CHANNEL?

In a modest office on a Paris side street, where she has been awaiting an important phone call from French President Francois Mitterrand, Edith Cresson warms to her favorite subject: the Japanese economic threat. "The Japanese have a strategy of conquest. And they're about to devour Europe."

On May 15, the call finally came--and the tough-talking Cresson accepted Mitterrand's offer to become the first woman Prime Minister of France. Socialist Cresson is every bit as brusque as the formidable Margaret Thatcher, Britain's former Prime Minister. But she is likely to create major waves in Europe's already shaky unification process in a very different way. France is already out of step with free-market Europe as 1992 nears, and Cresson's appointment is likely to increase the friction. She'll be promoting a dirigiste Europe of state aid to industry, government-orchestrated mergers, and strong barriers to keep the Japanese--but not the Americans--out."Europe and America need to col-laborate. Our companies should team up." the 57-year-old Cresson told BUSINESS WEEK shortly before her appointment ended Michel Rocard's three-year tour as the country's Prime Minister. "The U. S. is a great democracy. Japan is not. We have the same culture. Do we want Europe to become a Japanese colony?" she asked, her eyes flashing. "Well, it's not my cup of tea."

Europe grew used to such talk when Cresson served as France's European Affairs Minister. She quit that job last fall to protest France's poorly conceived aid to industry. But the French are having a harder time getting used to the idea of Cresson as Prime Minister. "She screams, she's a demagogue," claims an aide to Gaullist leader Jacques Chirac.

Harsh words, and not really fair. Most observers credit Cresson with a mind fully as sharp as her tongue. Full of charm and energy, she is a noted networker. She barnstormed east Germany after unification to promote deals for French companies--albeit without huge success. "She's got punch, tenacity, and contacts all over the world," says Didier Pineau-Valencienne, chairman of Schneider, a French electrical-equipment maker, which hired Cresson as a supersaleswoman when she left government last fall.

PRICKLY. She served Mitterrand as Agriculture Minister in the mid-1980s. Farmers joked about her name, which means "watercress" in French. She also served a stint as France's Industry & Trade Minister, earning a reputation for pushing for protectionism. But her chief credential is a long working relationship and close personal friendship with France's Socialist President.

Many sources believe her appointment indicates that Mitterrand will take tighter control of the government. His relationship with longtime rival Rocard has been prickly. Rocard's centrist policies have often promoted corporate profits at the expense of social goals, prompting public criticism from his more left-leaning boss.

By naming Cresson, Mitterrand is trying to strengthen the political standing of his Socialist Party. Parliamentary elections are due by 1993. Socialist strategists think they must start rebuilding their leftist credentials to avoid losing them. Cresson is expected to launch highly visible social programs such as education aid and job retraining to attack the unemployment that is soaring in France's five-month-old recession. And that would certainly go over well with many voters. "Unemployment is the most important failure of the Socialist government," says Jacques Bass, an official of France's big Socialist union, the CFDT.

But economists think social spending will be modest window dressing. There's too much at stake. Budgets are tight, and Mitterrand won't endanger the franc. A key priority for him is European monetary union. "He knows he can't influence that without low inflation and a strong franc," says Eric Taze-Bernard, senior economist at Banque Indosuez. More important than Cresson's appointment may be that of her Finance Minister, economists say. Many hope inflation-fighter Pierre Beregovoy stays on, but he may choose to leave after being passed over for Prime Minister.

IMAGE ENHANCEMENT. One reason Mitterrand wants a fresh face is that his own is growing shopworn. Although he is still France's favorite politician, with a 55% approval rating, he celebrated his 10th anniversary in power this month amid growing talk that he has been around long enough. Mitterrand's second term runs to 1995, with Rocard the leading Socialist successor. It's doubtful that Cresson has presidential ambitions.

By getting rid of Rocard, Mitterrand is hoping to clean up the image of the Socialist Party, which has been rocked by campaign-financing scandals. To many, picking a woman is a shrewd move to win public approval. If Cresson can give the Socialists a lift, Mitterrand could call early parliamentary elections. Now, the party is short of a majority, which is complicating votes on key bills.

Cresson hopes to make a mark on Europe's industrial policy. While she favors more state aid, she thinks France has poured money foolishly into companies such as computer maker Groupe Bull. "We've had blind confidence in management," she says. "Now, we'll demand results before giving more." Ideally, she says aid should come from the European Community and be tied to close collaboration among European companies.

Cresson's arrival clearly spells new French intransigence in Brussels on such key issues as Japanese automobile quotas, a quarrel that has already alienated France from free-market Britain. The battle will only intensify. "Now, we have our own Iron Lady," muses Andre Levy-Lang, chairman of French investment bank Paribas. Europe will be bracing for Cresson.

Prime Minister Edith Cresson on:

THE U.S.

'Europe and America need to collaborate. Companies should team up'

JAPAN

'The Japanese have a strategy of conquest. And they're about to devour

Europe'

FRENCH INDUSTRY

'We've had blind confidence in management. Now we'll demand results before

giving more'Stewart Toy, with Blanca Riemer, in Paris


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