Can Manuel Valls change France?

Last week, France’s President François Hollande made “a move as uncharacteristically bold as it is potentially encouraging for the cause of economic reform in France”, says The Economist. He appointed Manuel Valls, a business-friendly centrist, as his new prime minister.

France’s economy continues to languish. With high unemployment dampening consumption, and fiscal cutbacks another headwind, “a self-sustaining recovery is still out of reach”, says Morgan Stanley.

So, the only way France is going to get its burgeoning debt pile under control in the next few years is through structural reforms to raise the economy’s growth potential.

Can Valls get France moving again? Don’t hold your breath, says Deutsche Bank. The latest government reshuffle has left many traditional socialists in the government.

The risk is that Valls will be “forced into compromises with the left” and have to rely on short-lived cuts in current spending to trim deficits, rather than “far-reaching changes in the structures of government”.

So, some of the relatively limited measures promised this week and earlier this year – notably a payroll tax cut, lower corporation tax from 2016, and a pledge to seriously rein in spending after 2015 – may well fail to materialise.

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