The essential difference between the “balance” of the period 1950–1958 and that of 1958–1965 must be found in the results achieved in external payments. From 1959 onward, the current account balance not only remained in equilibrium but became surplus. Before 1958, the trade balance of metropolitan France had always been in deficit except in 1955, whereas during the five years following 1958 it remained consistently in surplus. The current account followed the same pattern: it was only positive in 1954 and 1955—years of balanced expansion with very limited price increases—but from 1959 onward it became largely surplus.
At the same time, gold and foreign exchange reserves grew continuously, rising from 645 million dollars at the end of 1957 to 5 billion dollars in 1965. France had not held such a level of international monetary reserves since the Poincaré period. The inflation of 1962–1964 did not reverse this trend; at most, it slowed it down. The fact that rapid—and even inflationary—growth did not generate a severe external imbalance indicates that a structural change had occurred in the functioning of the French economy.
Before 1958, periods of rapid growth accompanied by rising prices coincided with the largest external deficits. This was not the case in 1960, 1962, and 1963. The explanation of this shift cannot be attributed solely to economic policy; other structural and contextual factors likely contributed to restoring external balance. To understand this transformation, it is necessary to examine the circumstances of the 1957–1958 crisis and the developments that preceded it.
Inflation of 1956–1958
The crisis of this period was rooted in strong domestic inflation combined with an external recession in 1957, rather than in the political changes of May 1958. The labor force declined slightly between 1955 and 1956, falling from 18.75 million to 18.5 million due to the extension of military service during the Algerian War. This created tighter labor market conditions under full employment, accelerating wage increases.
The Suez crisis of 1956 further intensified economic difficulties by disrupting oil supplies. Price increases regained momentum: from 1.1% in 1955, inflation rose to 4.7% in 1956 and 5.6% in 1957.
These years of strong growth were also marked by a significant rise in private investment, which increased by 12.7% in 1955, 11.4% in 1956, and 12.7% in 1957. This pace was not reached again until 1961, and only temporarily. The expansion of private investment required substantial foreign currency resources. Anticipating increased competition following the Brussels agreements of 1956 and the establishment of the Common Market, French firms accelerated the modernization of their equipment and expanded production capacity.
However, the domestic sector producing capital goods remained insufficiently developed, a structural weakness identified in successive economic plans. As a result, imports of capital goods increased alongside economic growth. France’s deficit in capital goods trade with its Common Market partners rose from 230 million francs in 1954 to 610 million in 1956 and 780 million in 1957.
At the same time, while corporate investment increased rapidly, savings lagged behind. Net savings of non-financial companies stagnated between 1955 and 1957. Household savings did not compensate for this gap due to rapid growth in consumption. Whereas total savings exceeded gross investment in 1954 and 1955, from 1956 onward investment surpassed savings, creating financing needs of several billion francs annually.
This imbalance was ultimately reflected in the external deficit. In terms of current payments, the deficit rose from 684 million dollars in 1956 to 1.204 billion dollars in 1957. Gold and foreign exchange reserves declined sharply, from 1.912 billion dollars at the end of 1954 to 645 million dollars at the end of 1957.
During this period, the French economy entered a typical inflationary cycle. While it contributed to increasing productive capacity, it also led to external deficits and financial vulnerability. Under these conditions, regardless of the government in power, it became necessary to implement corrective measures to restore balance and contain inflationary pressures. Such measures began to be applied from July 1957 onward.