The French government resigned unexpectedly today after bitter disagreements over economic policy
By S.P. | PARIS
THE entire French government resigned unexpectedly today after bitter internal disagreements over economic policy. In a statement, President François Hollande announced that his prime minister, Manuel Valls (pictured left), who has been in the job for only five months, would name a new team tomorrow. Much depends on the new line-up, but the best outcome could—just possibly—be an end to the contradictions and muddle that have marked economic policy ever since Mr Hollande, a Socialist, was elected president in 2012.
The immediate trigger for this reshuffle was a weekend interview in Le Monde, a daily, followed by a political rally on August 24th, in which Arnaud Montebourg, the economy minister and long-time anti-austerity advocate, lashed out at Mr Valls’s economic policy. Enforced deficit reduction, he said, was an “economic aberration” and “financial absurdity”. France should not align itself with the “ideological axioms of the German right”, he added, and an alternative economic policy was urgently needed.
For Mr Valls, this was one provocation too far. Mr Montebourg, he said, had crossed a yellow line. It now looks almost certain that Mr Montebourg will not be part of the new government, possibly along with a number of other ministers who have criticised public-spending cuts and other policies under Mr Valls. They include Benoît Hamon, the education minister and an ally of Mr Montebourg on the party’s left wing, Christiane Taubira, the justice minister who has crossed swords with Mr Valls over criminal justice, and Aurélie Filippetti, the culture minister. By contrast, Laurent Fabius, a former prime minister, looks set to keep his job as foreign minister.
At first glance, all this smacks of desperation. The economy is stagnant, having recorded two consecutive quarters without growth in the first half of 2014. Unemployment, despite Mr Hollande’s repeated promises to curb its rise, remains at over 10%. And in spite of recent efforts to reduce public-spending, the weak economy means that France looks certain to miss its deficit target of 3.8% of GDP this year. Mr Hollande is the most unpopular president since polling began in the Fifth Republic. Even Mr Valls, who has cross-party appeal as a more reformist and moderate social democrat, has lost nine points in polls in the past month.
Yet this political crisis might also represent an opportunity. France’s tragedy under Mr Hollande has been to waste two years implementing a zig-zagging economic policy: first he imposed heavy tax increases across the board and promised to end austerity, then he belatedly began to curb public spending, bring down taxes and support private enterprise instead. Confusion has prevailed. Confidence has collapsed. Business investment has frozen.
Never one to choose clarity over ambiguity if he can avoid it, Mr Hollande has cheerfully governed with these contradictions. In January this year, for instance, he announced the start of a new business-friendly policy and €50 billion ($66 billion) of public-spending cuts, and then appointed the popular, tough-talking Mr Valls as prime minister. Yet he also promoted Mr Montebourg to the post of economy (though not finance) minister, giving him a stronger platform from which to denounce the very austerity and spending cuts that Mr Valls was put in place to implement. Mr Hollande calculated that the risk of a confusing economic policy was less high than that of having his firebrand left-winger sniping from the outside.
Now, however, the limits to that calculation seem to have been reached. The most encouraging outcome of all this could be that Mr Hollande finally makes the break with the party’s left wing and reinforces a moderate team. Already, there are signs that the network of moderates is taking over key jobs. Along with Mr Valls as prime minister, Jean-Pierre Jouyet, a Socialist who was Europe minister under Nicolas Sarkozy, Mr Hollande’s conservative predecessor, is now the presidential chief-of-staff. Two sensible economists—Jean Pisani-Ferry and Laurence Boone—have important economic-advisory jobs.
Yet his move carries a risk. Mr Montebourg and his friends will lose no opportunity to denounce from outside government what they see as German-imposed austerity. They will join the Greens, who have already refused to take part in Mr Valls’s government, as well as a small group of Socialist parliamentary rebels, who abstained during recent legislative votes. Together, the anti-austerity groups could well cause parliamentary trouble and even threaten to provoke fresh parliamentary elections. The upshot may be a clearer sense of direction for economic policymaking—but along a far more perilous political path.
