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25 Aug, 2014 08:45

French goverment resigns amid rancor over German austerity pressure

French goverment resigns amid rancor over German austerity pressure

The French government has resigned despite being formed just 4 months ago. They quit after ministers slammed President Francois Hollande's plans for taxation and cuts, while also being critical of Germany’s austerity program.

The statement published on Monday said the new office would be formed on Tuesday and would be in the "direction he (the president) has defined for our country."

Following the 2008 financial crisis, Germany has taken the lead to try and resurrect the EU’s economy. This has been marked by cutbacks and taxation, which have not proved to be universally popular within the eurozone. Economics Minister, Arnaud Montebourg, an outspoken critic of Germany, believes that country has hindered France’s development.

Montebourg said it was time to resist Germany's "obsession" with austerity and work out some alternative ways to promote household consumption. He said that measures that had been introduced since the financial crisis were not doing anything to help the country’s economy grow. He also blamed Germany for factory closures in France.

"You have to raise your voice. Germany is trapped in an austerity policy that it imposed across Europe," the Socialist minister said in the interview with the French newspaper Le Monde on Saturday.

"France is the eurozone's second-biggest economy, the world's fifth-greatest power, and it does not intend to align itself, ladies and gentlemen, with the excessive obsessions of Germany's conservatives," the Economic Minister added, as reported by AFP.

"The priority must be exiting crisis and the dogmatic reduction of deficits should come second," Mr. Montebourg said in an interview with Le Monde published ahead of the annual Fête de la Rose meeting of Socialist Party activists at Frangy-en-Bresse in eastern France.

Montebourg says he would like the government to stop being fixed on high taxes and spending cuts and should on the contrary be looking to cut taxes for the public so as to increase spending power and help revive the economy.

French President Francois Hollande and Prime Minister Manuel Valls.(Reuters / Philippe Wojazer)

Valls had been adamant that he would not tolerate anyone speaking out against government policy. In a show of support some of his colleagues did mention that the outspoken Montebourg had crossed a line, by criticizing France’s economic strategy in public.

Bruno Le Marie, who is a deputy with the center right Union for a Popular Movement (UMP) party, was scathing of the indecision within the government. "If Arnaud Montebourg and Benoit Hamon had any dignity they would quit. If Manuel Valls and François Hollande had any authority, they would fire them," the UMP party stalwart told Le Monde. "The problem is that never in the Fifth Republic have we had so little dignity and so little authority at the head of the state," the Local reported.

Finance Minister Michel Sapin acknowledged this month that if the economy did not pick up, France would miss its deficit-reduction target for this year. However, he stressed that there was no need to panic and that the government would continue cutting the deficit "at an appropriate pace."

The Ministers gave a reminder that economic weakness was causing political extremism and could turn into recession.

Hollande is facing a lot of domestic pressure, due to his failure to get the economy moving in the right direction. An Ifop poll on Sunday showed he is the most unpopular president in France in more than 50 years. Meanwhile, Valls, who was appointed to the position of Prime Minister in March, had an approval rating of just 36 percent.

Reports in the French newspaper, Le Parisien, say that Valls gave President Hollande an ultimatum concerning Montebourg and his outburst: "It's him or me. If you refuse, I will go." Hollande it seems has decided to give Valls his backing. Valls has to be seen to be strong and authoritative as this was part of his mandate when he was brought into the government. He replaced Jean-Marc Ayrault who was accused of being too soft.

This is the second government reshuffle in less than half a year, while the French economy is almost dormant, growing at just 0.5 percent. Hollande had hoped for growth of one percent in 2014, but the French central bank stated this month that the president had no hope of achieving this goal.