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| French Cabinet Is Dissolved, A Victim of Austerity Battles | French Cabinet Is Dissolved, A Victim of Austerity Battles |
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| PARIS — The collapse of the French government on Monday exposed widening divisions both within France’s leadership, and Europe more broadly, over austerity policies that many now fault for threatening to tip the eurozone back into recession. | PARIS — The collapse of the French government on Monday exposed widening divisions both within France’s leadership, and Europe more broadly, over austerity policies that many now fault for threatening to tip the eurozone back into recession. |
| Prime Minister Manuel Valls announced that he would dissolve his government after a rancorous battle in his cabinet over whether the belt-tightening measures taken by President François Hollande — at the urging of Germany and European Union officials in Brussels — were impeding France’s recovery. | Prime Minister Manuel Valls announced that he would dissolve his government after a rancorous battle in his cabinet over whether the belt-tightening measures taken by President François Hollande — at the urging of Germany and European Union officials in Brussels — were impeding France’s recovery. |
| The dispute broke into the open when Mr. Vall’s outspoken economy minister, Arnaud Montebourg, insisted in an interview over the weekend that austerity had gone too far. “The priority must be exiting the crisis, and the dogmatic reduction of deficits should come after,” he told the newspaper Le Monde. | The dispute broke into the open when Mr. Vall’s outspoken economy minister, Arnaud Montebourg, insisted in an interview over the weekend that austerity had gone too far. “The priority must be exiting the crisis, and the dogmatic reduction of deficits should come after,” he told the newspaper Le Monde. |
| He also took direct aim at the policies of Angela Merkel, the German chancellor. “Germany is caught in a trap of austerity that it is imposing across Europe,” he said. | He also took direct aim at the policies of Angela Merkel, the German chancellor. “Germany is caught in a trap of austerity that it is imposing across Europe,” he said. |
| The cabinet reshuffle precipitated by those comments was the second major shake-up since Mr. Hollande took over the presidency in 2012. Since then, the French economy has been flat and Mr. Hollande has been dogged by some of the lowest approval ratings for a French president in decades. | The cabinet reshuffle precipitated by those comments was the second major shake-up since Mr. Hollande took over the presidency in 2012. Since then, the French economy has been flat and Mr. Hollande has been dogged by some of the lowest approval ratings for a French president in decades. |
| The government collapse did more than throw France’s politics into disarray. It also bared the growing disagreement between France and Germany — Europe’s largest economies — over whether Ms. Merkel’s prescription of austerity threatened to turn a five-year euro crisis into a long-term malaise of low growth and high unemployment. | The government collapse did more than throw France’s politics into disarray. It also bared the growing disagreement between France and Germany — Europe’s largest economies — over whether Ms. Merkel’s prescription of austerity threatened to turn a five-year euro crisis into a long-term malaise of low growth and high unemployment. |
| The announcement in Paris coincided with a visit by Ms. Merkel to Spain, where she praised Prime Minister Mariano Rajoy for austerity measures that have included a freeze on public salaries and more flexible labor laws. While Mr. Rajoy credits the steps with restoring faint growth to Spain’s economy, the changes have not been popular. During the visit, the chancellor was forced to delay a planned speech after throngs of protesters booed her. | The announcement in Paris coincided with a visit by Ms. Merkel to Spain, where she praised Prime Minister Mariano Rajoy for austerity measures that have included a freeze on public salaries and more flexible labor laws. While Mr. Rajoy credits the steps with restoring faint growth to Spain’s economy, the changes have not been popular. During the visit, the chancellor was forced to delay a planned speech after throngs of protesters booed her. |
| Asked about events in France, Ms. Merkel told reporters that she wished Mr. Hollande success, but declined to comment on French domestic politics. The tension with the French government, however, has been evident. | Asked about events in France, Ms. Merkel told reporters that she wished Mr. Hollande success, but declined to comment on French domestic politics. The tension with the French government, however, has been evident. |
| In early August, after Mr. Hollande was quoted telling French reporters that a change in economic direction might be needed in Europe, a German government spokeswoman, Christiane Wirtz, crisply commented that the German government “sees no reason to undertake any correction in its policies,” and certainly not because of “rather glib statements from Paris.” | In early August, after Mr. Hollande was quoted telling French reporters that a change in economic direction might be needed in Europe, a German government spokeswoman, Christiane Wirtz, crisply commented that the German government “sees no reason to undertake any correction in its policies,” and certainly not because of “rather glib statements from Paris.” |
| Last week, Mr. Hollande acknowledged the problems his government faced, 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. The eurozone consists of the 18 members of the European Union that use the euro. | Last week, Mr. Hollande acknowledged the problems his government faced, 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. The eurozone consists of the 18 members of the European Union that use the euro. |
| As a result, he said, France will no longer try to meet a deficit reduction target this year, and may fall behind on deficit reduction next year as he seeks to put in place 50 billion euros worth of spending cuts he has already pledged to make through 2017. Mr. Hollande acknowledged that growth is so weak in France that it was unlikely to rebound any time soon. | As a result, he said, France will no longer try to meet a deficit reduction target this year, and may fall behind on deficit reduction next year as he seeks to put in place 50 billion euros worth of spending cuts he has already pledged to make through 2017. Mr. Hollande acknowledged that growth is so weak in France that it was unlikely to rebound any time soon. |
| His warning that growth had been jeopardized was the most strident repudiation yet of the policies that Ms. Merkel and the union’s bureaucrats insisted countries follow at the height of the euro crisis, when there was a palpable danger that the monetary union might break up. | His warning that growth had been jeopardized was the most strident repudiation yet of the policies that Ms. Merkel and the union’s bureaucrats insisted countries follow at the height of the euro crisis, when there was a palpable danger that the monetary union might break up. |
| But a rising chorus of critics and economists now say that the austerity approach has left European governments little leeway to employ the kind of growth measures necessary to restore demand. | But a rising chorus of critics and economists now say that the austerity approach has left European governments little leeway to employ the kind of growth measures necessary to restore demand. |
| Paul de Grauwe, a professor of political economy at the London School of Economics, said that the collapse of the French government underlined a split within France and Europe as a whole over whether austerity measures, coupled with structural changes, were enough to restore Europe’s sagging economic fortunes. | Paul de Grauwe, a professor of political economy at the London School of Economics, said that the collapse of the French government underlined a split within France and Europe as a whole over whether austerity measures, coupled with structural changes, were enough to restore Europe’s sagging economic fortunes. |
| “The Merkel view has been discredited, not in Germany, but pretty much everywhere else,” he said. “People are starting to see that the paradigm of the past three years is not enough. Confidence has not flowed and we are still waiting for growth.” | “The Merkel view has been discredited, not in Germany, but pretty much everywhere else,” he said. “People are starting to see that the paradigm of the past three years is not enough. Confidence has not flowed and we are still waiting for growth.” |
| While Mr. Hollande and Ms. Merkel have tussled in the past over the future economic direction of Europe, the French news media, citing advisers close to Mr. Valls, said his anger was fueled in part by concern that Mr. Montebourg had crossed a line by voicing such strident dissent publicly and that he was threatening to upend a relationship with Germany that is considered the motor of European integration. | While Mr. Hollande and Ms. Merkel have tussled in the past over the future economic direction of Europe, the French news media, citing advisers close to Mr. Valls, said his anger was fueled in part by concern that Mr. Montebourg had crossed a line by voicing such strident dissent publicly and that he was threatening to upend a relationship with Germany that is considered the motor of European integration. |
| “It’s either him or me,” Mr. Valls said to Mr. Hollande, according to Le Monde. | |
| A new government is to be formed on Tuesday and Mr. Valls is expected to remain as prime minister; Mr. Montebourg resigned on Monday and was expected to remain sidelined. | A new government is to be formed on Tuesday and Mr. Valls is expected to remain as prime minister; Mr. Montebourg resigned on Monday and was expected to remain sidelined. |
| The tension at the core of the eurozone comes after years of admonishments from Germany to rein in runaway debts and deficits. Those policies, pushed when the threat of the eurozone breaking up seemed urgent, are now blamed by many of Germany’s neighbors for making it harder, rather than easier, to mend tattered balance sheets and to reduce high unemployment. | The tension at the core of the eurozone comes after years of admonishments from Germany to rein in runaway debts and deficits. Those policies, pushed when the threat of the eurozone breaking up seemed urgent, are now blamed by many of Germany’s neighbors for making it harder, rather than easier, to mend tattered balance sheets and to reduce high unemployment. |
| The eurozone now 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 eurozone now 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. |
| Even though Mr. Hollande had pledged to cap austerity, Mr. Montebourg suggested over the weekend that the president had already overreached with a plan to slash spending and raise taxes to reduce the nation’s deficit. He also warned that if the French government did not shift course, it risked losing support to populist or extremist parties. | Even though Mr. Hollande had pledged to cap austerity, Mr. Montebourg suggested over the weekend that the president had already overreached with a plan to slash spending and raise taxes to reduce the nation’s deficit. He also warned that if the French government did not shift course, it risked losing support to populist or extremist parties. |
| The turmoil among the Socialists comes 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 adopted stringent austerity measures as conditions for receiving international bailouts, are still struggling to recover. | The turmoil among the Socialists comes 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 adopted 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 Ms. Merkel and other European leaders to make growth a priority. | 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 Ms. Merkel and other European leaders to make growth a priority. |
| Ms. Merkel has acknowledged the European economy needs to grow faster. But she has maintained that countries cannot backslide on commitments to improve their financial balance sheets. | |
| 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. | 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. |