This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2014/08/27/world/europe/france-new-government.html

The article has changed 7 times. There is an RSS feed of changes available.

Version 1 Version 2
New French Cabinet Expected to Oust Prominent Leftists New French Cabinet Ousts Prominent Leftists
(about 7 hours later)
PARIS — A day after infighting over economic policy led to the collapse of the government, Prime Minister Manuel Valls was expected to appoint a cabinet of centrist political allies on Tuesday, a move aimed at trying to crush an open rebellion on the left of his Socialist Party that threatens to hobble France and undermine a eurozone recovery. PARIS —
In an attempt to reassert his authority, the French news media reported, Mr. Valls was expected to name Michel Sapin, the current finance minister, to replace Economics Minister Arnaud Montebourg, a leftist firebrand whose criticism of the government’s austerity measures helped lead to its collapse. The new government approved on Tuesday by President François Hollande squelched important voices of dissent from the left wing of his Socialist Party but signaled little change of direction on economic policies that have left the French economy mired in stagnation.
Mr. Valls was also expected to bring on board Louis Gallois, the former chief executive of European Aeronautic Defense and Space, who wrote a seminal report in 2012 advising President François Hollande on policy changes to lift France’s flagging competitiveness. The marginal changes, analysts said, mean that France, Europe’s second-largest economy after Germany, could be in for a long slog toward recovery, with consequences for both Mr. Hollande’s already weak political standing and the wider European economy.
Analysts said the new cabinet was unlikely to change policy and would probably press ahead with economic measures already articulated by Mr. Hollande, including making France’s rigid labor market more flexible and implementing a “responsibility pact” to cut business charges on employers, in return for a pledge from companies to create jobs. At the same time, France is expected to continue pressing the European Union and Germany for more flexibility on fiscal rules, and to step up calls on the European Central Bank to help lift growth. “He is changing the government without changing the direction of policy, which is a bad thing,” said Jean-Paul Fitoussi, a professor of economics at the Institut d'Études Politiques de Paris. “We are in a world of uncertainty, and they need to be reactive to a dangerous new phenomenon that has appeared, which is stagnant growth.”
The shake-up of the government was the second major reshuffle since Mr. Hollande became president in 2012. His stewardship has been dogged by a flat economy and double-digit unemployment, helping to make him one of the most unpopular presidents in decades. After publicly criticizing Mr. Hollande’s economic policies, Arnaud Montebourg, France’s combative economy minister and a prominent voice of the left wing of the governing Socialist Party, was pushed out in the reshuffling — the second cabinet shake-up in six months.
The fall of the French cabinet, which exposed a sharp rift in France and Europe over austerity policies that many now blame for hampering growth, came after Mr. Montebourg challenged the government’s economic direction, saying that austerity was thwarting a French recovery. Prime Minister Manuel Valls, making clear that he and the president would brook little dissent, kept a trusted lieutenant, Michel Sapin, a career politician and a close friend of Mr. Hollande, as finance minister to oversee the nation’s accounts.
Advisers close to Mr. Valls said Mr. Montebourg had also crossed the line by openly criticizing Chancellor Angela Merkel of Germany and by defiantly insisting over the weekend that France and Europe should not be in thrall to the economic axioms of the German right. And he named Emmanuel Macron, 36, a former investment banker at Rothschild who has been a deputy secretary general at the Élysée Palace since 2012 and a close adviser to Mr. Hollande on economic policies, as the new economy minister, replacing Mr. Montebourg.
In addition to Mr. Montebourg, other leftist ministers were expected to leave the cabinet, including Benoît Hamon, the education minister, and Aurélie Filippetti, the culture minister, both of whom have signaled their disenchantment with Mr. Hollande’s economic policies. Both men were expected to press ahead with Mr. Hollande’s economic program, including a package of spending cuts totaling 50 billion euros, or $66 billion, through 2017, and a package of tax measures for employers designed to stoke hiring.
The crisis illustrated the open rebellion faced by Mr. Hollande from the left wing of his Socialist Party, and analysts warned that it threatened to undermine his economic measures. France, which has the largest economy in the eurozone, after Germany, is deeply influential over European Union policy in Brussels. The moves appeared to trim the ideological breadth of the cabinet at the expense of the left. But analysts expected that they would do little to alter the course Mr. Hollande has trod in trying to keep his Socialist Party with him while also appeasing European Union officials who want countries to mend their public finances by reducing budgets.
The French infighting threatens to spill over into the management of the eurozone, heightening divisions within its 18 countries and threatening its recovery. It could also provide a boon to the right at a time when France’s main conservative party is mired by a leadership crisis and the ascendant far-right National Front has been seeking to exploit divisions on both the left and the right. Mr. Hollande has tried to walk a line between the two camps, and watched his public standing dwindle. His policies have stoked ire from both the left and from French businesses and international investors, who say he has not gone far enough to revive France’s flagging competitiveness.
Mr. Sapin, if he becomes economics minister, will play a leading role in trying to steer the French economy toward greater stability. Like nearly every member of the cabinet, Mr. Sapin, a career Socialist politician who attended an elite French university with Mr. Hollande, has never worked in business. He is better versed in the nuances of European politics, having gotten his start in the early 1990s, when, as finance minister under President François Mitterrand, also a Socialist, he managed the successful referendum campaign to persuade the French to join in the creation of the euro. If nothing else, the crisis has made more apparent the competing forces that have tugged at Mr. Hollande since the beginning of his term in 2012. It has also highlighted the limited policy tools available to him in an atmosphere in France, and in much of the rest of Europe, of high public debt, persistent unemployment and stagnant growth that now threatens to transform the five-year euro crisis into a chronic economic illness.
More recently, Mr. Sapin has been busy pushing through many of the French president’s campaign promises, including a program for government-financed jobs for young people and changes to French labor law making it easier for employers to cut wages and working hours in economic downturns. Analysts said they expected the new government to push ahead with more of Mr. Hollande’s austerity measures, which were necessary to help reduce France’s deficit. Critics say they have thwarted an economic recovery after nearly a year of stagnant growth and high unemployment, which hovers above 10 percent.
He has also been a blunt voice on the dangers plaguing the French economy. Last year, he sparked an outcry from his party when he declared that France was essentially “bankrupt.” Earlier this month, he warned that a recovery would be difficult after nearly a year of stagnation and of weak growth elsewhere in Europe. Politically, the early judgments on the crisis were gloomy as jockeying was beginning for the next presidential elections in 2017, cementing Mr. Hollande’s image as a weak politician who now faces the added risk of seeing his political base further erode.
But in an interview in July at an economics conference in Aix-en-Provence, he rejected the notion that France risked becoming the next sick man of Europe. “We don’t see it like that,” he said. “France is a huge economy in Europe, with an industrial base, innovation and research. I don’t see how we can be sick — or at least sick for a long time.” Simon Tilford, an economist who is deputy director of the Center for European Reform, a research institute based in London, said that the latest French political crisis would invariably also diminish Mr. Hollande in Brussels in favor of Germany’s chancellor, Angela Merkel. It was her insistence on austerity that helped spur the divisions that led to the French crisis.
“We are reacting and we are reforming to enhance competitiveness,” he added. “In terms of the way Hollande is perceived abroad, this will reinforce the perception that he is a weak leader who is unable to marshal his troops effectively,” he said.
At home, the abruptness and upheaval caused by the crisis were a fresh blow to Mr. Hollande at a time when his popularity ratings are already at record lows, and disillusioned voters show signs of defecting to other parties, including the far-right National Front.
The reshuffle was not perceived here as a reassertion of the government’s authority over chaos. Françoise Fressoz, an editorial writer for Le Monde, wrote in a blog post on Tuesday that the reshuffle was a sign of deep crisis and showed a structural problem within the Socialist Party.
“This is a crisis that shows the weakness of the left, its amateurism, its lack of preparation when faced with a crisis, and its inability to work together to collectively overcome it,” she wrote. “There is not much authority left for the French president,” she added.
While the prospect of change may rest with Mr. Sapin and Mr. Macron, both are close allies of Mr. Hollande and are unlikely to voice much dissent.
The French newspaper La Tribune called Mr. Macron, who formerly worked at the French Treasury, “an anti-Montebourg” who was expected to “defend the official line.” Known for a market-friendly approach to policies, he played a significant role in advising Mr. Hollande on economic policies during his presidential campaign, promoting a policy based on supply and support to companies.
“He stands plainly for everything that Montebourg was opposed to,” Antonio Barroso, a senior vice president at the advisory firm Teneo Intelligence, said in a note to clients. “His appointment will reduce the potential for dissonant opinions inside the government and help Valls to push ahead with his policy agenda.”
Like nearly every member of the French cabinet, Mr. Sapin, who attended an elite French university with Mr. Hollande, has never worked in business.
He is better versed in the nuances of European politics, having gotten his start in the early 1990s, when, as finance minister under President François Mitterrand, also a Socialist, he managed the referendum campaign to persuade the French to join in the creation of the euro.
While Mr. Montebourg had warned that the government austerity program would only suppress a recovery, others said it was important for the French president to make some progress in curbing runaway government spending.
“Fifty billion in three years is massive for France, so it’s a positive sign that Mr. Hollande is committed to continuing what he’s doing,” said Famke Krumbmüller, a Europe analyst at the Eurasia Group in London. “The only alternative would be to do much less to please the left wing of his party. But the risk is that he alienates them and loses the absolute majority in the Parliament that he needs to pass new laws.”
With growth so weak, Mr. Sapin has already warned France’s European partners that the government can no longer meet its deficit targets, and he is expected to continue pressing the European Union and Germany for more flexibility on fiscal rules.
Still, in an interview in July, Mr. Sapin rejected the notion that France risked becoming the next sick man of Europe. “We don’t see it like that,” he said. “France is a huge economy in Europe, with an industrial base, innovation and research. I don’t see how we can be sick — or at least sick for a long time.”