PARIS – Facing pitiful poll numbers, Francois Hollande has cast his lot: The French president who once decried global finance and vowed a 75-per cent tax on millionaires has quashed dissent from his Socialist government’s left flank and appointed a well-heeled former investment banker as his new point man on the economy.
Several left-leaning critics were sent packing in a Cabinet shakeup that sent a message to international investors, European allies and millions of French: France is willing to embrace more free market policies and often unpopular reforms to tackle double-digit unemployment and zero economic growth.
The spirit of Hollande’s new focus was summed up in a speech by his prime minister, Manuel Valls, who put together a new Cabinet this week that includes former banker Emmanuel Macron as economy minister.
“I like companies,” he said to a standing ovation from a gathering of the country’s main employers lobby, which is reviled by many on the left, including in the Socialist party.
Hollande has not made good on his pledges to revive the economy and reduce unemployment since taking office in 2012. In January, he announced more pro-business policies, gradual deficit reduction, and tweaks to France’s generous social system — but not the overhaul sought by some. Recent polls show his approval rating in the high teens, among the lowest levels in decades for a French president.
Unlike neighbouring Spain and Italy, France has made no major structural reforms. But Hollande ordered 50 billion euros ($66 billion) in cost savings over three years across the government, sparing only schools and the judicial system, including courts and police.
The latest tilt toward the political centre suggests Hollande is committing to reforms and cuts, as opposed to increased public spending, to revive the economy, but without eroding the social safety net. It also indicates he is willing to try to bring France’s deficits back within European Union limits.
“This is a confirmation of the desire of the executive to maintain its direction,” said Antoine Bozio, an economist and director of the public policy institute IPP in Paris.
Tuesday’s Cabinet shuffle marked the exit of Arnaud Montebourg, a firebrand economy minister who recently publicly criticized Hollande’s budgetary rigour as a crimp to growth. Many believed Hollande had kept on Montebourg, a frequent critic, to assuage the solidly-left segment of the Socialist Party.
In his place enters Macron, a sharp-tongued, 36-year-old reputed wunderkind who like Hollande attended ENA, France’s elite school for public officials. Macron reportedly made millions as an investment banker with Rothschild for four years — notably advising on an $11.85 billion sale by U.S. pharmaceutical powerhouse Pfizer of its nutrition business to the Swiss food and drink giant Nestle SA. In an interview with the magazine Le Point just before he was named to the post, Macron said he would be open to rethinking France’s 35-hour workweek, saying flexibility would allow “an exit from this trap where the accumulation of rights for workers is transformed into an impairment for those who do not have work.”
The prime minister’s office said Thursday the 35-hour week — considered sacred by the French left and the bane of many employers — would not be called into question.
While largely untested in the public spotlight, Macron had been Hollande’s top economic adviser at the presidential palace from 2012 until June and an architect of the more pro-business tack unveiled in January. He was replaced at the palace by Laurence Boone, a former chief economist for Europe at Bank of America Merrill Lynch.
Macron will work alongside Finance Minister Michel Sapin, a longtime Hollande ally who is also considered centre-left and had traditionally kept a relatively low public profile.
This is a far cry from January 2012, when a campaigning Hollande said his “real adversary” was “the world of finance” even as aides quietly insisted that he was not anti-market. Early on as president, he ruffled feathers in business circles by promising a 75-per cent tax on income after the first 1 million euros.
Now, it’s a full embrace for business leaders.
Centre-left Prime Minister Valls, who returns with a Cabinet that’s more to his liking, told the employers union, Medef, that it was commonplace to pit the left against the corporate world. But he dismissed that as “an old refrain.”
“Companies create jobs,” he said. “There’s no employment without employers.”
His comments came shortly before the Labor Ministry reported that the number of job-seekers at the state employment agency rose another 0.8 per cent in July from the previous month, to a record 3.4 million people.