1981 - 1983
France's left-wing economic policy and the subsequent austerity turn
François Mitterrand was elected President of the French Republic in 1981, a period marked by the effects of the second oil shock: since 1978, growth had been slowing and inflation accelerating (a com-bination known as stagflation), while unemployment had been on the rise. Supported by an alliance of left-wing parties (the Socialist Party, Communist Party and Radical Party of the Left), the new president wanted to break away from capitalism and introduce a new social model. He began to implement a left-wing economic policy that was completely different from that being followed by France's main trading partners at the time Mitterand introduced a series of measures and reforms including: a wave of nationalisations in the industrial and banking sectors; a sharp increase in welfare benefits; a reduction in working time (39 hours a week, 5th week of paid holiday, retirement at age 60, etc.); a programme of major public works; and the introduction of a solidarity tax on wealth. This Keynesian-inspired policy led to a rapid deterioration in the budget deficit and trade deficit. The franc was devalued three times between 1981 and March 1983. In March 1983, Mitterrand adopted what was known as the tournant de la rigueur, or austerity turn, a series of policies aimed at adapting France to the new international economic environment, and keeping the franc in European Monetary System (EMS). The main priority was to combat inflation: wages were no longer indexed to prices, taxes were increased and subsidies to state-owned companies were cut.