France's Socialist government ap-pears increasingly reconciled to pension fund reform but its motive is the protection of French companies from foreign ownership rather than reform of retirement provision.

President Jacques Chirac supports the existing Thomas law enacted but not implemented last year, while the government envisages its own re-form, but the principle disagreements may be internal to the Socialist party.

Both Chirac and economics minister Dominique Strauss-Kahn backed home grown pension funds at last month's annual meeting of the Paris stock market regulator, the COB.

In his speech, Strauss-Kahn ack-nowledged that domestic funds would help to dilute the influence of foreign investors, a point echoed by Prime Minister Lionel Jospin. The government now says it will await a report from its own parliamentary committee on pensions due next month before acting.

Frédéric Jolly, président - directeur général of Frank Russell in Paris, says that three months ago the reform looked to be delayed indefinitely but he now gives legislation next year a 60% chance of success.

Inside the Socialist party there are people who are pro and against pension funds. Strauss-Kahn is now in favour but many are very open to union lobbying on this issue," he says.

"Strauss-Kahn doesn't want to take the old law as a model. But even if there is a new law, it will look like the sister of the old law - defined contribution with an insurance envelope."

Jolly believes that there is increasing awareness, in the light of Allianz buying AGF and other takeover rumours, of France's lack of long term domestic investors."The Socialists realise that they need to reinforce the power of French act-ors in the capital markets if we don't want all the French companies being bought by foreigners and overseas pension funds.""