Adieu, Cuba à la française

THE return to work after the summer break, known in France as la rentrée, is always a time of uncertainty and change. But nobody expected such a political upheaval. On August 25th the entire government was forced to resign after simmering disagreements over economic policy under President François Hollande erupted into the open. This prompted the eviction of anti-austerity ministers, and the formation of a fresh government under the same reformist prime minister, Manuel Valls. The upshot is greater clarity over economic policy, but more political uncertainty over putting it into effect.

The turmoil began when Arnaud Montebourg, the firebrand left-wing industry minister, lashed out at the government’s economic policy in a newspaper interview and then at a political rally. Amid bottles of burgundy and plates of local chicken at a fête in his old constituency, Mr Montebourg denounced austerity. It was a “financial absurdity” and an “economic aberration”, he declared, and France should not be “aligning itself with the obsessions of the German right”.

Mr Montebourg, who has a taste for theatrics, has seldom been shy about voicing disagreements with his ministerial colleagues. But this outburst was a step too far for Mr Valls. After discussion with Mr Hollande, the prime minister handed in the government’s resignation, evicting at a sweep both Mr Montebourg and two other ministers—Benoît Hamon at education and Aurélie Filippetti at culture—who supported him.

Mr Valls’s new government, unveiled on August 26th, left most of the senior ministers in place, including Michel Sapin at finance, Laurent Fabius at the foreign ministry and Jean-Yves Le Drian at defence. But there was one surprise, as encouraging as it was symbolic: Mr Montebourg was replaced by Emmanuel Macron, a former investment banker and economic adviser at the Elysée. A centre-left moderate, Mr Macron saw his mission under Mr Hollande as steering the Socialists towards a more business-friendly, less ideological stance. When Mr Hollande promised during his 2012 election campaign to slap on a 75% top income-tax rate, a dismayed Mr Macron muttered: “It’s Cuba, without the sun!”

Mr Macron’s appointment follows others in recent months that hint at a takeover by moderate social democrats at the expense of left-wing Socialists. Jean-Pierre Jouyet, a former Europe minister under Nicolas Sarkozy, the centre-right ex-president, is now Mr Hollande’s chief of staff. Laurence Boone, formerly an economist at Bank of America Merrill Lynch, has become his economic adviser. Jean Pisani-Ferry, a pragmatic economist, is in charge of long-term economic strategy.

The upshot should be less muddle over French economic policy. Never one to choose clarity over ambiguity if he could avoid it, Mr Hollande has presided since 2012 over a zigzagging economic policy, first raising taxes and vowing to punish the rich and put an end to austerity, then trying to lower taxes, curb public spending and support business instead. Now, says one French investment banker, there is a single coherent line: a “dramatic change”. On August 27th Mr Valls received a standing ovation after making a markedly pro-business speech at the summer school of Medef, the French employers’ federation.

The trouble, however, is that such clarity may come at the price of even more political obstructions to Mr Valls. From the viewpoint of the French left, his new team represents a betrayal of the policies that they thought they had elected Mr Hollande to enact. Laurent Baumel, a Socialist deputy and one of a group of left-wing rebels, called Mr Macron’s appointment “a derisory provocation”. Pierre Laurent, head of the Communist Party, dismissed the entire new government as “right-wing”.

So Mr Valls faces a perilous period. The first test will be the 2015 budget, containing some €21 billion of savings, which is due to go to parliament before October 7th. Already, Mr Valls has had to face down a group of Socialist rebels who abstained in recent parliamentary votes. The Greens have refused to take any part in Mr Valls’s government. And his own poll ratings, until recently as high as Mr Hollande’s were dismally low, have begun to tumble. In August Mr Valls lost nine points in one month, falling to 36%, according to Ifop, a pollster (see chart).

In the short run, it is unlikely that any of the Socialist rebels will vote against the government, and thus provoke an election that would put their own seats at risk, and probably bring the centre-right back into power. But they can still make Mr Valls’s life difficult by sniping from the sidelines. It is the cue for a battle for ideas on the French left in the run-up to the 2017 presidential election.

With an eye on a challenge himself, Mr Montebourg will continue to defy the government over austerity. The French economy stagnated in both the first and second quarters of this year, investment has dried up, the construction industry is at a standstill and the number of unemployed rose again in July, to almost 3.5m. With his usual panache, Mr Montebourg declared after his ousting that austerity was sinking France—and that both America’s Barack Obama and the IMF’s Christine Lagarde agreed with him.

At the euro zone level, he has a point. Yet in France, the trouble has not been too much German-imposed austerity through spending cuts, of which there have been almost none, but too many tax increases, a collapse of confidence, rigid labour markets and bad policies, such as new rent-control rules brought in by Mr Hollande, which have choked the building industry.

In truth, France has let its budget-deficit targets slip, easing fiscal consolidation. Mr Sapin has already said that the target of 3.8% of GDP for 2014 will not be met. The best hope for Mr Valls will be to secure more time to get to 3%, which France was meant to reach by 2015, by stressing the reform-minded nature of his new government. “By reassuring its European partners on reforms, we think it will be easier for Paris to obtain further leeway on fiscal issues,” argues Gilles Moëc, chief European economist at Deutsche Bank.

With a political rebellion on his left at home, and the ever-present National Front on the far right, Mr Valls will need all the support he can muster in Brussels and Berlin—however sceptical they may be about France’s habitual inability to honour its previous promises.