After a local election drubbing, French President Francois Hollande duly sacked his prime minister last night and tempered his economic reform drive, vowing to focus more on growth and “social justice”. A fuller cabinet reshuffle is expected today.
Interior minister Manuel Valls, anything but a left-wing firebrand whose appointment could stir unrest on the left of the ruling Socialist party, takes the premiership with a mandate to pursue cuts in labour charges for business but also tax cuts to boost consumer spending and employment.
Hollande said France would still cut public spending to pay for a 30 billion euro reduction in labour charges on business, part of a “responsibility pact” with employers he launched in January. But he said Sunday’s elections also showed the need for a “solidarity pact” offering workers tax cuts and assurances on welfare, youth training and education.
Brussels would have to cut it some slack with its budget deficit, he said. Paris has already been given until the end of 2015 to bring the deficit below the EU limit of 3 percent of GDP. Data released on Monday showed the deficit stood at 4.3 percent in 2013, higher than the government’s 4.1 percent target.
Some of the euro zone and EU finance ministers meeting in Athens, which has the EU presidency for six months, may well look askance at all that. Southern European countries have endured sharp economic pain to reduce their debts while Germany remains doubtful of the austerity/growth trade-off which Hollande is pushing.