Hollande sacks his government

French president François Hollande has sought to quell dissent over the government's economic policy.

French president Franois 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

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.

Recommended

The British equity market is shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Robin Geffen: dividend cuts aren't all down to Covid
Stockmarkets

Robin Geffen: dividend cuts aren't all down to Covid

The seeds of recent dividend cuts and cancellations were sowed many years ago, says veteran investor Robin Geffen.
25 Oct 2020
Dividend payments will take a long time to recover
Income investing

Dividend payments will take a long time to recover

Companies are gradually resuming dividend payouts, but we can expect only a modest rebound in 2021, says Cris Sholto Heaton.
25 Oct 2020
“Big Finance” comes out of its decade-long slump as bankers bounce back
Stockmarkets

“Big Finance” comes out of its decade-long slump as bankers bounce back

The financial sector was hammered by the crisis of 2008. Now, bankers are rediscovering their swagger, says Matthew Lynn.
25 Oct 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
Don’t miss this bus: take a bet on National Express
Trading

Don’t miss this bus: take a bet on National Express

Bus operator National Express is cheap, robust and ideally placed to ride the recovery. Matthew Partridge explains how traders can play it.
19 Oct 2020
Three stocks that can cope with Covid-19
Share tips

Three stocks that can cope with Covid-19

Professional investor Zehrid Osmani of the Martin Currie Global Portfolio Trust, picks three stocks that he thinks should be able to weather the coron…
12 Oct 2020