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French Prime Minister Moves to Dissolve Cabinet French Prime Minister Moves to Dissolve Cabinet
(about 2 hours later)
PARIS — French politics was thrown into disarray on Monday when Prime Minister Manuel Valls announced plans to dissolve the government after a rancorous battle in his cabinet over the future direction of the economy. PARIS — French politics were thrown into disarray on Monday after Prime Minister Manuel Valls said he would dissolve the government after a divisive battle in his cabinet over whether belt-tightening measures supported by President François Hollande were impeding France’s stagnant economy from recovering.
French news media reported that Mr. Valls had threatened to resign unless President François Hollande ordered a shake-up of the government after the economy minister, Arnaud Montebourg, challenged the government’s economic policies. Mr. Montebourg argued that budgetary austerity was undermining growth and hobbling the eurozone’s recovery. The fresh political crisis reflected a widening backlash against austerity not only in France but in Europe more broadly, as well as deepening tensions between France and Germany, which continues to advocate budget cuts as necessary to restore confidence in the eurozone.
The French news media reported that Mr. Valls had threatened to resign on Sunday unless Mr. Hollande ordered a shake-up of the government after his outspoken economy minister, Arnaud Montebourg, insisted that budgetary austerity had gone too far and was hobbling France and the eurozone.
“It’s either him or me,” Mr. Valls said to Mr. Hollande, according to the French newspaper Le Monde.“It’s either him or me,” Mr. Valls said to Mr. Hollande, according to the French newspaper Le Monde.
The new government is to be formed on Tuesday, and Mr. Valls is expected to remain as prime minister. Mr. Montebourg suggested over the weekend that Mr. Hollande had overreached in pushing austerity, including a plan to slash spending and raise taxes, to reduce the nation’s deficit.
The move underlined a wider debate in Europe between Germany, which advocates budgetary austerity as necessary medicine to restore sluggish economies, and critics like Mr. Montebourg who argue that stringent fiscal measures are stifling Europe, including France. “The priority must be exiting the crisis, and the dogmatic reduction of deficits should come after,” Mr. Montebourg said in an interview published in Le Monde. In a speech over the weekend, Mr. Montebourg added that he had asked Mr. Hollande for a “major shift” in economic policy to favor growth, adding, “Promising to get the economy going again hasn’t worked.”
The government shake-up also exposed the challenge faced by Mr. Hollande from the left wing of his party as he struggles to revive France’s flat economy. Mr. Valls was initially a relatively popular prime minister, but his support has diminished as the economy has faltered, while Mr. Hollande is one of the most unpopular presidents in decades, according to recent polls. Mr. Montebourg also took direct aim at the policies of the German chancellor, Angela Merkel. “We need to raise the tone,'’ he said in the interview in Le Monde. “Germany is caught in a trap of austerity that it is imposing across Europe.”
Mr. Hollande took office two years ago, and the economy has been stagnant since, with unemployment now above 10 percent. Opinion polls show that four out of five French people are unsatisfied with Mr. Hollande’s stewardship of the economy. But the straitjacket of the European Union’s austerity policies has left the government little leeway to employ the kind of growth measures that many economists say are necessary to restore domestic demand. In making his plea for change, Mr. Montebourg also said that if the French government did not shift course, it risked losing support to populist or extremist parties.
The turmoil in the Socialist government comes as the center-right is mired in a leadership crisis and the ascendant far-right National Front is seeking to fill the electoral vacuum. In making his plea for a change in economic policy, Mr. Montebourg said over the weekend that if the government did not change direction, it risked losing support to populist or extremist parties. A new government is to be formed on Tuesday and Mr. Valls is expected to remain as prime minister. After raising dissent from within the government, it seemed likely that Mr. Montebourg would be dropped from the cabinet.
Pascal Perrineau, a professor at the Institut d'Études Politiques of Paris, said that the government resignation was a potent sign of open rebellion within the Socialist Party and the struggle the government faces to maintain its parliamentary majority when elections are held in 2017. But he said it also showed that Mr. Hollande was unwilling to cave into demands from the hard left of his party. Last week, Mr. Hollande acknowledged the problems facing his government, saying in an interview with Le Monde that austerity policies the country had been compelled to follow to meet the eurozone’s budget deficit target had made it nearly impossible to achieve a recovery after six months of zero growth and more than a year of weak economic activity.
As a result, France will no longer try to meet a deficit reduction target this year, he said. Even so, growth is so weak in France, which has the second-largest economy in Europe after Germany, that it is unlikely to rebound any time soon, he added.
It was the most strident repudiation yet of the policies that Ms. Merkel and the so-called troika of lenders — the European Commission, the International Monetary Fund and the European Central Bank — insisted countries follow at the height of the crisis, when there was a palpable danger that the 18-member euro monetary union might break up.
That threat has disappeared, but requirements that even countries facing a recession slash spending and raise taxes to meet fiscal targets has shifted the European debt crisis into a new phase: one of prolonged anemic growth and high joblessness.
Five years after Europe’s debt crisis broke out, countries that adhered to admonishments from Germany to rein in runaway debts and deficits have found themselves struggling to recover economically. In many countries, austerity has made it harder, rather than easier, to mend tattered balance sheets and to reduce high unemployment.
Now, the eurozone faces the threat of sliding back into its third recession in five years, after the currency bloc failed to grow at all between April and June. By contrast, the United States economy is recovering and unemployment is declining.
The government shake-up in France — the second since Mr. Hollande took over the presidency in 2012 — exposed the challenge the president faces from the left wing of his party as he struggles to revive France’s flat economy.
Mr. Valls was initially a relatively popular prime minister, but his support diminished as the economy faltered. Mr. Hollande has one of the lowest popularity ratings in decades. According to an IFOP poll published on Saturday by Le Journal du Dimanche, Mr. Valls’s approval rating has plunged to 36 percent and only 17 percent of the French approve of Mr. Hollande’s stewardship of the country.
Mr. Hollande took office two years ago, and the French economy has been stagnant since, with unemployment above 10 percent. Opinion polls show that four out of five French people are unsatisfied with Mr. Hollande’s handling of the economy. But the straitjacket of the European Union’s austerity orthodoxy has left the government little leeway to employ the kind of growth measures that many economists say are necessary to restore demand.
While the United States has rebounded since the worst of the economic crisis, a much-heralded European recovery has failed to emerge. With the Continent’s three main engines — Germany, France and Italy — sputtering, weakness in the European Union, with its more than 500 million consumers and one-quarter share of world gross domestic product, threatens to undermine the global outlook.
The turmoil in France’s Socialist government comes as Mr. Hollande faces evaporating support, as the center-right is buffeted by a leadership crisis and as the far-right National Front is gaining ground and seeking to fill the electoral vacuum.
Elsewhere in Europe, countries like Greece and Portugal, which adapted stringent austerity measures as conditions for receiving international bailouts, are still struggling to recover. Spain, whose government last year pledged to ease up on austerity, is only starting to see the return of some growth. In Italy, where the economy recently slid back into a recession, Prime Minister Matteo Renzi has also backed away from austerity and called on Mrs. Merkel and other European leaders to make growth a priority.
France, like many other countries, was compelled to adopt some austerity measures at the height of the euro crisis, when financial markets punished countries with high debts and deficits through higher interest rates. Today, those rates have fallen sharply, but a growth rebound has still been slow in coming.
Mr. Montebourg, a charismatic figure from the left wing of the Socialist Party, has long been a thorn in the government’s side, delighting his substantial anti-globalization constituency with strong criticism of foreign investors but muddying Mr. Hollande’s message that France is open to international business.
Pascal Perrineau, a professor at the Institut d’Etudes Politiques in Paris, said that the government resignation was a potent sign of open rebellion within the Socialist Party and of the struggle the government faced to maintain its parliamentary majority when elections are held in 2017. But he said it also showed that Mr. Hollande was unwilling to cave into demands from the hard left of his party to stop tough but necessary economic changes.
“Mr. Hollande is sending a message at the national and international level that France will not change its economic direction at a time of great political and economic weakness in France,” Mr. Perrineau said.“Mr. Hollande is sending a message at the national and international level that France will not change its economic direction at a time of great political and economic weakness in France,” Mr. Perrineau said.