French government collapses after row over economic policy
French ministers resign in economy row
France's economy minister says he and two colleagues are leaving their posts amid a bitter row over economic policy.
Arnaud Montebourg had publicly urged President Hollande's government to end austerity policies and focus on growth.
He was backed by Education Minister Benoit Hamon and Culture Minister Aurelie Filippetti.
Prime Minister Manuel Valls accused Mr Montebourg of crossing "a yellow line" and announced the resignation of his entire cabinet.
The move had apparently been agreed with President Francois Hollande, who immediately asked him to form a new government on Tuesday "consistent with the direction" he had set for the country.
France is struggling with high unemployment and low growth and President Francois Hollande's popularity is the lowest for a president in more than 50 years.
Mr Montebourg told a news conference later on Monday he thought it necessary to speak out to try to avert the European Union's "descent into hell".
"I informed the prime minister.... that if he deemed my convictions counter to the direction of the government he leads, then in that case I thought it necessary for me to be let go."
Mr Hamon and Ms Filippetti had made the same choice, he added.
Hollande purges rebels - Lucy Williamson, BBC News, Paris
Francois Hollande is sending a clear message: dissenters within the party will not be tolerated at this difficult economic moment.
But the decision to dissolve the government is also a sign of how much is at stake for him.
With unemployment running at more than 10%, growth stagnant, and polls suggesting that less than 20% of voters think he can turn the economy around, Mr Hollande is facing a difficult autumn.
His plan has been to cut spending in order to fund tax cuts for business, in the hope of boosting the economy, but there are those in his party who disagree.
They want less focus on austerity, and more money funnelled direct to households. Purging the rebels is an eye-catching move, but with his popularity at an all-time low, Mr Hollande cannot afford to look weak.
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Mr Montebourg, 51, is on the left wing of the governing Socialist party, and has campaigned against globalisation.
He came third in the party's contest for presidential candidate in 2011.
He told Le Monde newspaper that Germany was trapped in an austerity policy that it had imposed across Europe and spoke at a meeting with Mr Hamon in eastern France on Sunday, with the support of Culture Minister Aurelie Filippetti.
Mr Hamon called on Sunday for a revival in demand, and for an end to German Chancellor Angela Merkel setting Europe's direction.
It is starting to crack on all sides - it is always so when somebody think that making a war and wining it takes a couple of days. Now the economy starts to suffer bad and only now they know what was it all about
Get Back To Work Mr. Hollande; French Jobseekers Surge To Record High
Despite all the 'promises' French joblessness has risen every month since April 2011... July's jump is the 2nd biggest sinmce April 2013 and at 3.424 million is a fresh record high. One can only hope (though good luck with that) that the new cabinet - same as the old cabinet - will turn things around. With 80% of French people believing that Hollande cannot fix the economy, we suspect things get worse before better...
French ministers are piling the pressure on Draghi to do something...
*VALLS SAYS NEW FRENCH GOVT STANDS FOR ECONOMIC CLAIRITY
*VALLS ECB NEEDS TO GO FURTHER IN FIGHTING INFLATION
*VALLS SAYS NEW FRENCH GOVT STANDS FOR ECONOMIC CLAIRITY
*VALLS SAYS LOW INFLATION THREATENS EUROPEAN PROJECT
Charts: Bloomberg
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The French reshuffle (via SocGen)
The cabinet reshuffle announced by French PM Valls was small and in line with our expectations. This is clearly a centerleft cabinet comprised of like-minded politicians, without the leftwing ‘rebels’. Memb rs of the new government should be more in sync with President Hollande’s economic choices this time around. This is embodied by the appointment of Mr Macron as Minister of Economy and Industry.
We continue to believe that the government will maintain a stable majority at the National Assembly despite the rebel politicians. The first test of this will come with the confidence vote, probably on Friday. In April, PM Valls gained an overhelming majority in his first confidence vote. But this time, the ruling majority may be weakened, although the Fifth Republic, founded in 1958, can still function. The odds of the government falling are very small. Indeed, such an event would trigger a general election, which would be political suicide for most Socialist lawmakers and their allies.
A center-left cabinet of like-minded politicians
The cabinet reshuffle was small, with most ministers keeping their jobs, notably Mr Sapin as Finance Minister, Mr Fabius as Foreign Minister and Mrs Royal as Minister of Energy and Ecology. The rebels, Mr Montebourg, Minister of Economy and Industry, Mr Hamon, Minister of Education and Mrs Filipetti, Minister of Culture, did not retain their positions, as expected.
The two main appointments concern Mrs Vallaud-Belkacem as Minister of Education and Mr Macron as Minister of Economy and Industry. Mrs Vallaud-Belkacem, 37, is a bright politician born in Morocco. This is the first time a woman has been appointed as the Minister of Education, an important post. Mr Macron, 36, was the Deputy General Secretary of the Elysée from 2012 to 2014 in charge of economic policy and is known to be very close to President Hollande. He was a former banker and embodies the center-left line, a supply-side driven economic policy. He is well versed in structural reform, having participated in the Attali Commission in 2008. Put simply, he represents the antithesis of Mr Montebourg, and there is no doubt that Mr Sapin and Mr Macron are on the same page.
Overall, we believe that the cabinet reshuffle will help reduce policy uncertainty at the domestic level. The message related to Mr Hollande’s economic programme was muddied by conflicting statements made by several of his government ministers in the past, by Mr Montebourg in particular. The hope is that the new and more compact government will help restore confidence among economic agents and investors.
A weakened majority, but the Fifth Republic is still functioning and remains stable
The question is whether the departure of leftwing rebels Mr Montebourg and Mr Hamon will cost the parliamentary majority. We think not. This should be confirmed fairly quickly with the confidence vote later this week (probably on Friday). The government needs a majority of 289 sea s (out of 577) at the National Assembly to run the country. In April’s confidence vote, PM Valls received 306 votes, although 11 Socialist members abstained. This suggests that the government has sufficient room to manoeuvre despite the potential for new defections. In particular, the Socialists and the Center-Left (Parti Radical de Gauche) represent 308 seats, while most Green MEPs (about 10 out of 17) could continue to vote in favour of the ruling coalition.
The Fifth Republic, established by General de Gaulle in 1958, has proven very stable indeed. No PM has ever been thrown out by Parliament. All cabinet reshuffles have been decided by the president. The main reason for this lies in France’s Dissolution Weapon: the President can dissolve the Assembly whenever he wants. Against the current backdrop, a genera election would doubtless lead to a crushing defeat of the Socialist party and would be political suicide for most Socialist politicians. This is why we believe a no confidence vote is very unlikely. Moreover, the ruling party has a very powerful weapon if it wants to pass bills that could be challenged by rebel politicians: Article 49.3, which the Hollande administration has yet to use. Article 49.3, known as "the responsibility commitment", allows the government to push through any bill without subjecting it to a vote. For the bill to be rejected, a no confidence vote would be required, but in that case, the government would fall, and this has not happened since the creation of the First Republic in 1958.
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FRANCE HAS BEEN thrown into fresh crisis today after President Francois Hollande asked his prime minister to form a new government.
The president ordered Prime Minister Manuel Valls to form a new cabinet “consistent with the direction he has set for the country,” the presidency said in a statement.
It did not give any reasons, but the move comes after Economy Minister Arnaud Montebourg spent his weekend bad-mouthing the country’s economic direction and ally Germany in a much-criticised show of insubordination.
The Local reports that Hollande and Prime Minister Manuel Valls had been under pressure after Montebourg and Education Minister Benoit Hamon separately criticised the government’s obsession with reducing deficit instead of pursuing policies to encourage growth.
While Valls himself has not reacted, his entourage said yesterday that Montebourg had crossed a line. It is expected that the new government will be named tomorrow.
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