A CHEAPER FRANC FOR A SMALLER FRANCE

BIT by bit, the successor to Charles de Gaulle has altered the grand designs of the Fifth Republic. In contrast to the general's no to British entry into the Common Market, Georges Pompidou seemed prepared to say yes under the right conditions. In place of De Gaulle's insistence on grandeur, Pompidou sought to give the impression that he was only an average Frenchman. The style at the Elysee reflected the change.

Last week Georges Pompidou made his most decisive break so far with the traditions of De Gaulle. In a surprise move, his government cut the value of the French franc by 12 1/2%, from 20.255-c- to 18.004-c-. For years, De Gaulle had equated the stability of the franc with French honor and his own infallibility; a stable franc had given him the power to play the role of a loner in international politics. Last November, against the weight of global financial opinion and the advice of most of his own ministers, he stunned the world by refusing to devalue the franc, which was already weak and unsteady. Pompidou, a former Rothschild banker, could not bring himself to defy reality. "Common sense advises us to align the franc on a rate recognized in foreign markets," he explained to the French in a special statement. "We content ourselves with taking note of a fact and acting on it."

Wide Effects. The immediate effect of devaluation is to make French goods cheaper in world trade and visits to France less costly for foreign tourists. Both developments will bolster the French economy. The effects will be felt beyond France's borders, however. When the international money markets reopen this week, there are bound to be repercussions. The U.S. dollar should feel no strain because it still ranks as one of the world's strongest currencies, but the convalescent British pound seems certain to come under renewed speculative attack. Although London affirmed its determination to maintain the price of sterling at its present $2.40 level, financiers are divided over whether Britain has the resources to make that decision stick. At the unlikely worst, a forced devaluation of sterling could start a chain reaction of other devaluations, throwing the international monetary apparatus into chaos.

The French devaluation represents a considerable political victory for West Germany. A lower-priced franc reduces the pressures on the Bonn government to raise the 25-c- value of the robust Deutsche Mark. The mark is overvalued in comparison with the dollar and pound as well as with the franc, and that disparity has become a major source of international speculative troubles. But Germany has resisted any change on the ground that it would only touch off domestic inflation.

Pompidou and Finance Minister Valery Giscard D'Estaing decided on July 16 to devalue the franc. Only nine people in all of France knew of the impending devaluation. As far as France and the rest of the world were concerned, Pompidou was about to leave Paris on holiday at week's end. So artful was the camouflage that only a single French newsman remained behind, lounging in the press department of Pompidou's Elysee Palace and flicking through the President's itinerary for a visit to Corsica. Then a stream of Citroen limousines began to disgorge Cabinet ministers for a hastily called meeting late Friday afternoon.

At 8 o'clock, after financial markets in Europe and New York closed for the weekend, Pompidou broke the news on radio and TV. He was followed by Premier Jacques Chaban-Delmas. Though financial experts knew that France had lately suffered massive losses of gold and foreign reserves, few realized to what depths the country's financial position had sunk. Giscard bluntly revealed the hitherto secret figures.

France had been losing its monetary reserves at a rate of $500 million a month in the second half of 1968 and at $300 million a month this year. By year's end, declared Giscard, "the reserves would have been practically down to zero." France, in short, was facing the threat of national bankruptcy.

Inflationary Spiral. De Gaulle's proud franc was dented in the riots and strikes that shook France in May and June of 1968. As the price of settling the strikes, De Gaulle granted huge wage increases to the workers. French labor won across-the-board wage increases of 15%, but it made no corresponding gain in output. The result was an inflation that sent prices rising beyond the reach of the fat new pay packets. The French began to worry about the franc's strength. They contributed to its weakness by smuggling francs abroad to buy healthier currencies. The Gaullist government sought to stop the outflow by imposing strict exchange controls and limiting French tourists to $200 a year for spending abroad, but the measures were largely ineffective. The French at home rushed to buy goods before inflation drove prices up further. The spurt in consumption only sucked in imports that depleted France's monetary coffers faster.

The devaluation is the 13th in the past 40 years for the franc. The last occasion was the 17 1/2% cut of Dec. 29, 1958, which De Gaulle made in order to restore the franc to a sound basis before embarking on his grand design of making France a larger force in the world. Last week's move will not automatically cure France's 6 1/2%-a-year inflation or its more deepseated economic troubles. As Britain has learned in the wake of its own 1967 devaluation, cutting the value of a currency only buys time for overdue economic reforms. The Pompidou government expects to rely on a sharp reduction in government spending and a tightening of credit to check wages and prices. That policy may mean trouble with French labor leaders, who greeted devaluation with demands for higher pay.

Outside of France, the devaluation was welcomed as a necessary and prudent move. Its manner and its timing only enhanced Pompidou's reputation as a skilled and steady statesman. Since the value of a currency is irrevocably linked to a nation's image of itself, the devaluation gave some idea of Pompidou's own concept of the strained and overextended nation that he inherited from Charles de Gaulle. Pompidou's "devaluation without glory," as Le Figaro called it, signaled his own willingness to settle for a smaller but certainly more sensible France.

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