A democratic republic with a constitution approved by referendum in 1958, France is both economically and politically a hybrid of many systems. Economically, it is a capitalistic country with a socialist outlook, exemplified by property rights and a capitalistic concept of private ownership on one hand and an extremely generous social security system and a socialist approach to solving the society's problems on the other. France has a presidential system combined with a more typical European parliamentary arrangement.
The president of the republic, as the head of state, is elected by direct suffrage every 7 years, and appoints the prime minister as the head of government. However, the president must choose the prime minister from a party or a group of political parties determined by the National Assembly, which is the lower house of the French Parliament. It is quite possible that the president and the prime minister may come from different, and even rival, political parties. This is known as cohabitation. Following the 1995 presidential elections, President Jacques Chirac, who represents the center-right side of the political spectrum, cohabits with a center-left government headed by Prime Minister Lionel Jospin, who was his rival in 1995 presidential elections. Prime Minister Jospin is the head of the Socialist Party, and his coalition government includes representatives from the Communist and Green parties.
The French parliament is bicameral (a representative system with 2 houses in the parliament or legislature, as in Germany or the United States). Representatives are elected to the National Assembly (the lower house of parliament) by direct universal suffrage, and senators are elected indirectly by an electoral college which is comprised of approximately 145,000 representatives of city councilmen. Representatives serve for 5 years, whereas senators are elected for 9 years. The main power brokers in the French political spectrum can be classified from right to left as National Front (FN), Rally for the Republic (RPR), Rally for France (RPF), Union for French Democracy (UDF), the Socialist Party (PS), Green Party, and the Communist Party of France (PCF). The extreme left parties support continued state control over the economy with big spending programs, while the right-wing parties want to end most forms of state support. The right-wing parties also wish to see far less immigration and more people of European origin populating the country. The high level of unemployment and rising nationalism, expressed also in the form of xenophobia (enmity against foreigners and immigrants), have fueled the popularity of the extremist National Front. President Chirac is from RPR. Both that party and the RPF are neo-Gaullist parties (parties supporting the policies and principles laid down by former French statesman Charles de Gaulle, which call for greater European and French power, prestige, and independence, especially from the United States). The UDF is relatively moderate. There are other small parties which may play roles, sometimes influential ones, at the local but not the national levels. Left-leaning parties, especially the socialists, usually advocate implementing a domestic agenda aimed at fighting unemployment and promoting social programs.
Because of pressure from the EU, more budgetary discipline has been emphasized in governmental affairs. Protectionist policies have been abandoned against other members of EU countries. There is strong support for the EU amongst the French people as well as from the president and prime minister. In fact, France is among the most prominent supporters of a unified Europe. Some believe the basis of this support is France's effort to counter the power of the United States in the world's economic and political affairs.
French governments changed hands between left and right in the last quarter of the 20th century, and sometimes political movements changed course. After the influential General de Gaulle's right-leaning government in 1960s, President Francois Mitterand broke with tradition when he came to power in early the 1980s. De Gaulle held the office of the president between 1959 and 1969, and Mitterand served 2 terms as president (1981-95). Catering to the demands of the powerful Communist Party, which supported Mitterand, his socialist government increased government spending by engaging in several public projects and increased taxes in order to pay for the spending. While most of the capitalist world recognized the virtues of the free market economy, the Mitterand government embarked on nationalization efforts. This policy soon led the country into economic turmoil with higher levels of inflation coupled with lower values for the French franc. This tendency forced the government to reverse some of its previous policy decisions, even if it meant adopting policy suggestions of political rivals. Mitterand's prime minister (Chirac) lost the presidential election in 1988 only to win it in 1995. However, the solutions to the economic problems on which Chirac based his campaigns have not yet been completely achieved. With one of the highest levels of unemployment in the EU and its president battered by corruption charges, France saw a general strike in December 1995 that brought the country to a virtual economic standstill. The French government still has a strong presence in the economy, especially in such industries as aeronautics, defense, automobiles, and telecommunications. Even though a great deal has been achieved in privatization, the government can still exert its influence on privatized companies via its large minority stakes in such companies. Nevertheless, after a policy decision of the president in 1996 to streamline defense industries, a wave of mergers and restructuring took place among French defense companies.
France prefers to continue with a large government budget financed mainly by taxes rather than to curtail its spending. Currently, France ranks highest in broadly defined tax categories among G8 countries (a group of the most industrialized countries of the world consists of the United States, Japan, Germany, France, Italy, Canada, Russia, and the United Kingdom). The basic corporate tax rate is 33.33 percent. The largest tax burden in France, though, is income tax , which in the highest income bracket runs to 54 percent. (By comparison, U.S. federal taxes range from 15 to 33 percent.) The highest tax bracket starts at only about US$40,000, so the middle and upper classes in France pay a significant portion of their salaries in taxes. This rate is one cause, some economists believe, of unemployment, because high taxation together with generous government spending programs discourages working. Incomes of less than 26,100 French francs (approximately US$3,500) a year are not taxed at all, while all income levels above US$20,000 are taxed of a rate of at least 40 percent.