Can France be considered as one of those smaller dynamic countries of Europe - such as Ireland, Spain and the Netherlands - who are among the most economically progressive. Or should it be lined up with the major and slightly out of breath economies, beside Germany and Italy? Growth in France has been strong now for three years and the forecasts are excellent for the two years ahead. The inexorable rise of unemployment has finally been halted - since the middle of 1997 figures have been dropping and have now, barely three years later, reached the level which prevailed at the start of the 1990s.
This remarkable performance is explained naturally by the regained growth but also by an active, although controversial, employment policy based around a 35-hour week. As a result, France is enjoying a feel-good factor and optimistic households are consuming happily.
The growth which France is experiencing is being carried along by sound internal dynamics. The country is far from Japanese-style growth laboriously carried out at arm's length by the Government or growth led from the outside which faulters at the first setback in world economic conditions. Instead, France has gone from the vicious circle of the 1990s to a virtuous circle and the Asian crisis has not been able to dent the dynamics of this economy.
The news is good all round and we should not hesitate to call France a dynamic economy. Maybe the French can even start dreaming of a return to full employment - remarkable for this country for which the expression, "mass unemployment", might have been coined.
Yet, there is a sting in the tail of this argument. It is to do with a vision of Europe which could be fatal to it. Dynamic France, in fact, "belongs to the little countries" whose initial positions were behind the European average (Spain, Portugal, or Ireland). Their dynamism is very closely bound up with their small size. They are not the rule for Europe. Europe, after all, is an old continent, getting older. It may be very rich, but it is not really dynamic.
If old mares like to think they are young fillies and start to gallop ahead, it is because there is a great need to hurry. If France's growth experience becomes contagious, the whole of Europe risks catching fire.
The tensions that everyone fears have not yet emerged. The analysts have predicted them: the recent revival of inflation at the start of the year in Europe was provoked by an upsurge in oil prices. Once this stabilised, European inflation returned to very low rates at 2 per cent.
Let us hope that oil is traded at lower than $30 a barrel and, as a result, inflation for the euro zone should be lower than 1 per cent. The OECD tried in vain to explain that French structural unemployment is around 9 per cent (and that of Spain is about 17 per cent). All that is needed is a little common sense to understand that we are far from full employment. According to this international organisation, France is now very close to overheating.
Economic policy should slow down job creation and be used, instead, to maintain underemployment around 9 per cent. The world has changed and full employment in the third millennium does not correspond to an unemployment rate of 2 per cent like in the 1960s, but rather to 4 or 5 per cent as in the US.
The measurements and the concepts that the OECD uses are not the right ones and, in any case, are not reliable enough to make them the basis of a restrictive policy. The latest rise in interest rates decided by the European Central Bank could well have been inspired by analysis close to the OECD model. The belief that the European economy is now close to full employment could have justified this monetary hardening.
The chiefs of the ECB should apply the Greenspan method: wait and see the inflationary tensions before triggering responses. This way of doing things anticipates the inflationary risk less and is in this way much less prone to forecasting and analysis errors. It allows a finer adjustment of economic conditions and lets the US federal authorities have the "lead" over financial markets.
The issue of positioning France, whether we see it as a small dynamic country or a large mature economy, is not solely an academic one. What is involved is also knowing whether Europe can experience growth rates the American way, carried along by the new economy and whether - like the US - Europe can, without inflationary tensions, approach an unemployment rate of 4 per cent.
Rather than seeking the example across the Atlantic, perhaps the development model is among the so-called dynamic "little" countries of Europe.
The European Central Bank is in the process of showing us that, despite being only 18 months old, it is already old-style and does not believe in the resources of the new economy.
Xavier Timbeau is the director of the France Division of the French Observatory of Economic Conditions
