The French franc may be headed for its fifth devaluation since 1981.

As the German mark continues to rise rapidly in value, pressure for a readjustment of the currencies within the European Monetary System, or EMS, has grown irresistible.The Banque de France has been selling deutsche marks in recent weeks to prevent the West German currency from climbing above the 3.28 level. With limited monetary reserves, the French can only resist market forces to a certain extent.

Eduard Balladur, state Minister of Finance, Economy and Privatization, announced that the removal of the country's exchange control legislation will not go as fast as originally planned. The government probably feels that the total abolition of controls would leave the franc too vulnerable to speculative attack. Instead, France will ease exchange controls gradually over the coming weeks.

For the first time, residents will be allowed to hold accounts in foreign currency. This follows other liberalization measures permitting French firms to hold foreign currency earned abroad for two months, instead of the previous 15 days. Moreover, they can freely invest abroad and forward cover all currencies.

However, French banks will still not be allowed to lend francs to non- residents. Such a reform, judged as the litmus test of the government's liberalization program, is planned for a future, but still undetermined, date.

According to banking sources in Paris, the short-term determing factor for the franc is the deutsche mark/U.S. dollar relationship. If the dollar was to drop to the 1.8-mark-level, France would probably not resist a devaluation. This is the reason that Prime Minister Jacques Chirac has been insisting the the Bundesbank reduce its interest rate, thereby relieving pressure on the franc and other weaker EMS currencies like the Danish kroner.

France's last devaluation in April saw the franc lose 5.6 percent of its value against the mark. At the time, Mr. Balladur recommended an 8 percent devaluation in order to make French goods more competitive on its principal foreign market. It fell far short of the German-French inflation differential of 12.8 percent between March 1983 and April 1986.

The underlying weakness of the French trade account - registering in the first eight months of the year a deficit of 2.4 billion francs - has also feed speculation that the franc will be devalued once again. The favorite guessing game in French banking circles is whether the franc will be able to hold up for the rest of the year.

Some sources believe that the Germans will resist a realignment of EMS currencies until after the parliamentary elections at the end of the year. The question remains, however, if the franc will be devalued in a serene atmosphere as in April or in a crisis situation as was often the case in the recent past.

But as one French economist said: Devaluations are not a panacea for they will not automatically solve France's economic problems; the government has to coordinate them with badly-needed and often painful structural reforms that will render French industry more competitive on foreign markets and, thereby, help put an end to to what, with tax evasion, has become a national sport.

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