French president François Hollande dissolved his cabinet early this week and asked his prime minister, Manuel Valls, to name a new team.
The trigger for the move was a weekend interview with economy minister Arnaud Montebourg, a left-winger who lambasted the government’s economic policy, especially the attempt to clamp down on the budget deficit.
The new economy minister is Emmanuel Macron, a former Rothschild investment banker who has already advised Hollande for several years. Other dissidents usually associated with the left of the Socialist Party have also gone.
What the commentators said
Political uncertainty usually rattles investors, said Allister Heath in The Daily Telegraph. But “the purging of hard-left ministers” gave the benchmark French stock market index, the CAC 40, quite a boost. “The old guard was so bad that nothing could be any worse, the markets were saying, and rightly so.”
Montebourg’s departure should result in a more coherent approach to economic policy, as the FT pointed out. In his two years as president, Hollande has been “notoriously confused” about what he is trying to do. He came to office on a platform of taxing the rich.
Then in March he appointed Valls to drive reforms, such as cutting labour taxes and government spending. But he also gave Montebourg a bigger role, “allowing him a more prominent platform from which to attack the very policies that Valls was advocating. Something had to give.”
It’s a start, but France’s ossified economy needs a lot more treatment. Employers in France pay the state around 40% of every salary they pay, compared to 12% here, said Charles Bremner in The Times.
Cutting red tape and deregulating protected professions is crucial. “Archaic costs and fee fixing” cost €6bn a year, and the French pay €205 more than their European neighbours for protected services. For instance, only pharmacies may sell painkillers, allowing the chemists to impose a large mark-up.
Yet, Hollande’s reforms may now face trouble in parliament, as Montebourg’s call for ditching austerity “resonates well beyond the left”, said the FT. There could even be fresh elections, further delaying the overhaul the economy so urgently needs.