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02 April 2014

French president names new PM; clashes with Brussels on austerity policies


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Centrist Interior Minister Manuel Valls has been named as Hollande's new PM, replacing Jean-Marc Ayrault who resigned after the ruling Socialists were badly bruised in local elections. Hollande subsequently requested a delay in meeting targets for the budget deficit, to allow room for his new growth plan.


The Guardian reports that Valls, 51, was named prime minister on Monday evening after the Socialists lost control of at least 150 towns in local elections. Most went to the mainstream opposition right, but a dozen were won by the far-right Front National. Valls, who is on the right of the Socialist party (PS), will have to pull together diverse factions of the government.

In a parting address to Valls, Ayrault told gathered staff and media: "Here we have one mission only: to serve France and the French. As far as I'm concerned, it has been my only driving preoccupation for the last two years. I have had only one political aim, to permit France to take her place in the world, while at the same time preserving her social and republican model. It's demanding. But it's the only path that we should follow and continue to follow. What we have had to do here is difficult and not finished."

Valls responded: "We are two socialists, two republicans. I am very proud to have been your minister of interior and we have worked well together. I will obviously continue the work that you have started with the aim of putting the country back on its feet, with the same attachment to the country and to the French."

Valls is unpopular with the left-wing of the Parti Socialiste (PS) for being tough on law and order and liberal on economic issues, reports European Voice. Other parties were disappointed with the choice of Valls as prime minister. The Greens announced they would not participate in a government led by Valls. Pascal Canfin, who as minister for cooperation and development was one of two ministers from the Greens in the Ayrault government [along with Housing Minister Cecile Duflot], confirmed this but did not specify if his party would support Valls in the parliament.

According to Reuters, Hollande vowed to pursue cuts in labour charges for business but also promised tax cuts to boost consumer spending, insisting that EU partners take his reform efforts into account in judging whether France had respected commitments to Brussels. "I have understood your message, it is clear", Hollande said in a televised message to the nation in which he acknowledged his 22-month-old government had so far failed to turn around the eurozone's second largest economy. "Not enough change and too much slowness. Not enough jobs and too much unemployment. Not enough social justice and too many taxes... I say it once again: we have to get our country back on the right track."

In his speech, Hollande assigned three main priorities for the new government, which he said will be “restrained, consistent and united”. He reiterated his plan for a €50 billion payroll tax cut for businesses. He also said that the new-look government will make cutting the budget deficit its main goal, and promised “fewer expenses for companies, particularly on low income salary, as well as more hiring and investments”.

Hollande promised more “social justice”, announcing a plan to cut taxes from now until the end of 2017. He also stressed the need for an energy transition, assigning Valls's government the task of reshaping France's energy mix. “[France] should reduce its dependence from both oil and nuclear sources”, he said.

New cabinet

In further reporting from Reuters, leftist Arnaud Montebourg, a fierce critic of budget austerity, was named French economy minister on Wednesday in a reshuffled government packed with strident personalities, including President Hollande's former live-in partner Segolene Royal. Royal returns to front-line politics as energy and environment minister. Montebourg, known for his attacks on big business and the European Commission, rises from industry minister to take charge of an enlarged economy ministry. Montebourg had condemned the European Commission for its “austerity and dogma” and for being “totally useless on the question of growth”. He will work alongside Michel Sapin, a long-time Hollande loyalist who was promoted from labour minister to replace Pierre Moscovici as finance minister - a job he held over 20 years ago under ex-President François Mitterrand. The promotion of Montebourg and the naming as education minister of prominent left-winger Benoît Hamon was an attempt by Hollande to please everyone in his Socialist Party, which still has a slender majority in parliament.

The scope for in-fighting also remains high: Valls has long enraged the French left with his socially conservative positions, while Royal brazenly defied Socialist party grandees to run her ultimately failed 2007 presidential bid. But the conservative opposition took aim at Montebourg, who in 2011 called the policies of German Chancellor Angela Merkel "dangerous and suicidal". "I see that Mr Montebourg has been promoted in charge of economic policy", Jean-François Cope, leader of the UMP party said after the names of the new government were read out on the steps of Hollande's Elysée Palace. "It is he that will go to Europe to discuss our economic policy, notably with the Germans whom he has copiously insulted over the last two years", said Cope.

Budget deficit

The European Commission has already given France an extra two years until 2015 to get its budget deficit within a target of 3 per cent of economic output - a goal that looked far off with data this week showing it stood at 4.3 per cent in 2013. In the first big policy challenge for the government, France has to detail its long-term public finance plans to Brussels later this month and any deviation from the 3 per cent target will be likely to go down badly.

Valls said that there were limits to how far reining in the public finances could go. "We obviously have to reduce our public deficit", Valls said on TF1 television. "But we have to do it intelligently without putting the fundamental public services at risk."

Hollande said on Monday that France's efforts to stimulate growth, notably through tax cuts for low-earners, would have to be taken into account by Brussels. Jeroen Dijsselbloem, chairman of the eurozone's finance ministers, hit back by insisting that France knew it must deliver on its promises.

The Financial Times (subscription) reports that France's demand for more leeway in imposing Berlin-backed austerity policies has reignited a fight at the core of the eurozone over how to promote growth in countries struggling to pull out of recession. Paris has traded blows with Brussels over the issue after President Hollande made clear that he wanted a delay in meeting targets for the budget deficit to allow room for his new growth plan. 

Like Mr Hollande, Matteo Renzi, the new Italian prime minister, has repeatedly suggested he should be allowed to flout the budget deficit limit if it presents a credible reform effort. But the European Commission, charged with enforcing the eurozone’s tough new fiscal rules, signalled it would not look favourably on French requests not to be held to its already delayed target of reducing its budget deficit to 3 per cent of national income by 2015.

Reacting to Mr Hollande, VP Rehn noted that Paris’ deadline “has already been extended twice in recent years”. Speaking at a meeting of EU finance ministers in Athens, he added: “What is important now is France make the necessary structural effort. I believe it is essential France acts decisively".

France is under “specific monitoring” by Brussels because of its deficit slippage. But Mr Hollande said: “It is not about making savings for the sake of savings. Above all I do not want to undermine growth, which is reviving".

Figures published on Monday by Insee, France’s national statistics institute, showed the budget deficit in 2013 hit 4.3 per cent, above the EU’s estimate of 4.2 per cent. Public debt, at 93.5 per cent of GDP, public spending and taxes all rose as a proportion of national income.

Comments

EP President Schulz

"On behalf of the European Parliament, I congratulate Mr Manuel Valls on his appointment as Prime Minister and greet the new government, whose composition has been announced today. I look forward to our new partnership, which I hope will be a continuation of the excellent relationship maintained with the government of Jean-Marc Ayrault. I would also like to acknowledge the work done by Mr Ayrault at a turning point for the future of France and Europe. France plays a fundamental role within the European Union. I know that the new government under the leadership of President François Hollande at heart will continue to strengthen the ties between our institutions and put them at the service of citizens."
 

S&D/Swoboda

"The success of the National Front in local elections should not call into question the political principles of the left. Faced with the National Front's anti-Europe position, we need to strengthen the European dimension. From immigration to effective policy for growth and investment, the fight against unemployment and social inclusion, close European cooperation is essential to be able to boost European societies and economic policies.
 
The reduction of deficits and the public debt must be accompanied and supported by an investment policy. This is the condition for a viable and sustainable economic policy. No country can respond only to current challenges."
 




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