Austerity or consumption – the debate that divides the French

The same question has been facing all European countries since the economic crisis that erupted in 2008.

FRENCH PRIME MINISTER Manuel Valls (photo credit: REUTERS)
(photo credit: REUTERS)
PARIS – Since Manuel Valls became France’s prime minister five months ago (but in fact even since his Socialist Party’s victory in the May 2012 election), the debate that has divided the government formed from the Socialist Party, the Greens, and other leftist groups, has been whether to conduct a politics of austerity or to encourage consumption.
The same question has been facing all European countries since the economic crisis that erupted in 2008 and to which Germany’s Angela Merkel has declared very firmly: “AUSTERITY! AUSTERITY! AUSTERITY!” President François Hollande and his prime minister seem to have made clear their choice for austerity, by imposing their will over the cabinet after rebel leftist ministers had called for an economic policy U-turn.
Those calls for a change are not new, but when Economy Minister Arnaud Montebourg had condemned the policy of “fiscal austerity” and attacked Euro-zone powerhouse Germany’s “obsession” with budgetary rigor, the two heads of the government had had enough, especially after Montebourg made a joke during a Socialist Party meeting in eastern France on Sunday: “I am going to send him [the president] a good bottle of the best vintage of recovery,” Montebourg quipped. He is the leader of the so-called Redressement Productif (“Productive Recovery”), a far leftist group, and has recently criticized Hollande’s alignment with Germany and the EU, declaring: “In order to succeed, the Chinese don’t need to have Brussels under their thumb.”
The last “joke” made Hollande and Valls furious. Reports in the media had the PM demanding of the president, “Enough is is either him or me.” Immediately after, in a terse statement, Hollande’s office announced that the prime minister had handed in his government’s resignation, opening the way for a reshuffle just five months after taking office.
The announcement went on to say: “The head of state asked the prime minister to form a team that supports the objectives he has set out for the country.”
This statement suggests that Valls will continue trying to revive the Euro’s second largest economy with tax cuts for businesses, while slowly reining in its public deficit by trimming spending.
France has lagged far behind other Euro-zone economies in emerging from the recent slowdown, fueling frustration with Hollande’s leadership both within his Socialist Party and in public opinion. At a press conference he gave on Monday at the Ministry of Economy and Finance in Paris, Montebourg described the austerity regime as being “absurd,” “unjust,” and “inefficient.”
According to him, the policy chosen by the government is “responsible for the continuation and the aggravation of the crisis,” adding that “There are other alternatives to this policy which puts the republic in danger.” This was a hint at the danger in the growth of the far Right National Front.
Referring to Montebourg’s political ambitions, BFMTV, the 24-hour TV news program, reacted by announcing, “There is now a new beginning, and this beginning is named Arnaud Montebourg.” The ex-minister has promised to continue promoting “products made in France” (he is nicknamed “Monsieur made in France”) and also announced the resignation of another minister close to him, Education Minister Benoit Hamon. A third minister, the left-wing Aurelie Fillipetti, who was minister of culture, signaled she also does not want a post in the new government.
By deciding to sack Montebourg, who is viewed as a potential presidential rival, Hollande risks seeing the ousted minister take with him a band of rebel lawmakers and deprive him of the parliamentary majority he needs to push reforms through.
Opposition conservatives, who for weeks have been embroiled in their own leadership rows, called for an outright dissolution of parliament, as has the extreme right-wing National Front.
“The only solution is the dissolution of the National Assembly,” said Florian Philippot, vice president of the National Front.
Former prime minister Francois Fillon, one of a handful of hopefuls for the conservative ticket in the 2017 presidential election, said the reshuffle “illustrates the confusion that surrounds the president.”
According to all the political analysts, the risk within this reshuffle is whether Francois Hollande will still have a majority in parliament. The daily paper Le Parisien led with a headline on Tuesday, “The difficulties are starting now,” referring ironically to Hollande’s 2012 campaign slogan of “Time for change.”
This week the weather was particularly stormy and wet in France. On Monday, while Paris was under a political tempest, the president was commemorating the 70th anniversary of the Liberation of Paris and the end of the German occupation.
All the TV stations showed him making his speech in heavy rain, without anyone sheltering him with an umbrella.
“It is a symbolic and surrealist image...You can’t imagine Obama, Cameron, or Merkel giving a speech in such hard conditions,” said a TV commentator.
In a vote of confidence in April, the government scored 306 votes with the help of smaller allied parties, well above the 289 votes needed for an absolute majority. A new survey released this weekend showed Hollande’s poll ratings stuck at 17 percent, the lowest personal rating for any leader of France since the Fifth Republic was formed in 1958. Valls, a once-popular interior minister, saw his own popularity eroded by his failure to tackle unemployment, which now stands at 10 percent.
At the Sunday meeting, Montebourg said deficit-reduction measures carried out since the 2008 financial crisis had crippled the Euro-zone economies and urged governments to change course swiftly, or lose their voters to populist and extremist parties. Analysts said the showdown suggested the 51-year-old Montebourg, who this year gained increased popularity by forcing US giant General Electric to sweeten its offer for French industrial icon Alstrom’s turbine business, was looking to disassociate himself from Hollande and rally the country’s splintered Left behind him.