(FORTUNE Magazine) – Even staunch capitalists might consider toasting the French Socialist government. After creeping through most of the 1980s with under 2.5% annual growth, it is now a sparkling success. ''France has become one of the most competitive countries in Europe,'' says Didier Paquot, an economist with DRI Europe. ''It is getting more like Germany.'' Last year, France's economy grew 3.7%, while inflation remained a moderate 3%. Exports rose faster than at any time in 15 years. The seeds for France's flowering were sown in the early 1980s when President Francois Mitterrand's government dropped its scheme of massive nationalization and indexed wage increases. Instead, it opted for tighter money, lower corporate taxes, and skimpy wage increases. The changes have the strong support of Mitterrand's No. 2, Prime Minister Michel Rocard, another Socialist who backs free-market economics. French companies are among Europe's most aggressive acquisitors. Entrepreneur Bernard Tapie recently spent $289 million to buy 80% of the German sporting goods company Adidas. In 1990's first quarter, companies that are owned or controlled by the French government bought 15 European firms, according to Translink's European Deal Review. State-owned Renault's decision to trade shares with Sweden's Volvo and start developing new models together was the most publicized. France is well prepared to face an oil crisis. Over 70% of its electricity is generated by nuclear power -- a larger percentage than any other European nation. But since France imports 96% of its oil, higher prices will pinch. DRI Europe estimates that higher oil prices could add around 0.3% to inflation and take a similar-size bite out of growth. Unemployment remains sticky at 9.5%. France's economy should blossom even more. As West Germany's largest trading partner, France is expected to profit from unification by selling goods, particularly food, to East Germany. - K.B.