Corner of Blue

Premier Felix Gaillard summoned newsmen to an impromptu conference one night last week and greeted them with a broad smile: "Gentlemen, good news at last. A corner of blue has opened in the sky for France. We are delivered from the nightmare in which we have been living for many months." Gaillard had just learned that his emissary Jean Monnet, France's most famed advocate of European unity, was coming home from Washington bearing $655 million in credits.

The big credit package made available to France $250 million from the European Payments Union and $131 million from its quota in the International Monetary Fund, enabled it to defer payments on $186 million owed to the U.S. and the Export-Import Bank during the next three years, and to pay the U.S. in francs for $88 million worth of military supplies and surplus cotton.

Since 1953 the French production growth of about 10% a year has matched Germany's, and exceeded that of all other countries in Europe. But massive outlays for supplies abroad, plus the war in Algeria, plus openhanded spending under Guy Mollet's Socialist government at home, reduced gold and hard-money reserves to an untouchable minimum. Overbuying of raw materials last year and speculation against the franc helped put foreign trade out of balance by $1.4 billion.

When Gaillard, then Finance Minister, devalued the franc last summer, pressure eased. As Premier he courageously curbed credit and imports, decreased the subsidies that are the bane of the French economy. Understood in last week's aid agreement was his pledge to hold his tough line, keeping 1958's budget deficit to a "manageable" $1.4 billion, and the trade deficit around $400 million. By 1959 Gaillard expects the retooled economy to stand on its own with the world. Since last December it has been doing just that. Exports, including such invisible factors as tourism, exceeded imports for the first time since 1955.

The credit negotiators carefully avoided mention of the quickest way to cure France's money troubles: an end to the $4,000,000-a-day Algerian war. But while Monnet talked in Washington, Gaillard pulled through the French Parliament a measure which brightened hopes that some compromise, may yet be reached. After one fallen Premier and eight months of debate, both Houses gave final approval to a loi-cadre for Algeria setting up the framework of limited home rule by regional assemblies, and establishing voting equality for Moslem and French (TIME, Dec. 9).

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