Sweet Sacrifice

From a mirrored salon in the ornate Hotel Matignon, official residence of France's Premiers, mild-mannered Socialist Guy Mollet last week cried out to his countrymen: "I ask every Frenchman to do his duty, to subscribe for Algeria and for France!" In these heroic words Premier Mollet imposed a sweet wartime sacrifice on France's citizens--the moral ob ligation to do a good piece of business at government expense.

Two months ago, when he and his government finally began to face up to the fiscal problems (TIME, July 16) created by the then 20-month-old Algerian rebellion (now costing France $2,900,000 a day), Mollet's logical inclination was to increase personal and corporate income taxes. At this direct challenge to the universal French conviction that a man's private income is none of the government's business, virtually the entire National Assembly rose in revolt. Socialist Mollet, keenly aware that any effective tax increase would fall most heavily upon the low-income groups from which he derives his political support, did not fight very hard. The result: an agreement that the government would not raise income taxes until it had tried to finance Algerian war costs through a public loan.

Devised by Rube. True to his promise, Mollet last week made public the terms of a new $429 million bond issue that might have been devised by Rube Goldberg. The new bonds will not only pay 5% interest annually-- many stocks on the Paris Bourse pay less than 3%--but also carry a built-in hedge against inflation. If, when the bonds come up for redemption--the last of them will mature in 1971--average stock prices on the Bourse have increased, the face value of the bonds will be increased proportionately. A fall in stock prices, however, will not reduce their redemption value below par. Oddest provision of all: if the public fails to buy up the issue, the government threatens to increase tax rates enough to make up the difference. In that case, citizens who have bought bonds will be allowed to turn them in as payment on the new taxes.

Mollet's public loan seems to be straight fiscal poison for France. In interest charges alone the new bonds will cost the government $2,100,000 next year, and, given continued inflation, their redemption could prove a ruinous burden on the government of 1971. (Had a similar loan been floated in 1949, the government would now be obliged to pay out $250 for every $100 worth of bonds originally issued.) Worse yet, the $429 million which the loan is expected to raise will pay for only about five months of fighting in Algeria. Then, if the rebellion has not been settled, France's economic prestidigitators will be faced with an aggravated version of their original problem--how to finance a war without asking the French people to tighten their belts.

Guarded by Troops. Having launched his bond issue, harried Guy Mollet flew off to Algiers, presumably to discuss with French Minister Resident Robert Lacoste a scheme to offer rebellious Algeria "federative status," i.e., a considerable degree of independence. Seven months ago, when Mollet appeared in Algeria to look for a "liberal" solution to the rebellion, diehard French colons pelted him with banana peels and tomatoes. Last week, as he drove from the Algiers airport to Lacoste's summer palace, the Premier's route was lined with heavily armed French troops. This time the fear was not that the colons would throw tomatoes, but that Algerian terrorists would throw hand grenades.

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