It began last Wednesday, when French President François Hollande gave Le Monde an interview in which he insisted he would stay the course with an economic policy that has seen his approval rating plummet from 60 percent, just after his election in 2012, to 17 percent this week. Hollande’s domestic strategy is part of his close and somewhat baffling alliance with German Chancellor Angela Merkel, the enforcer of European austerity.
At the center of Hollande’s domestic policy is the so-called Responsibility Pact, which proposes shifting employer-paid payroll taxes to individual taxpayers, coupled with unspecified cuts in government spending. The measure is deeply unpopular, especially on the Left, so much so that it triggered a fronde, or insurrection, in the ranks of the president’s own Socialist Party. Prime Minister Manuel Valls nevertheless succeeded in mollifying the hundred or so dissident deputies, only to see the provisions of the Pact that were intended to ease the additional tax burden on the poorest taxpayers struck down by the Constitutional Council, a French judicial body that determines whether legislation conforms to the nation’s Constitution.
The government was therefore already facing a restive majority, half of whose members were insisting on a major revision of this key measure before voting on a new draft designed to pass muster with the Constitutional Council. The president’s uncompromising interview with Le Monde may have been intended to send a signal of resolute firmness, but its immediate result was to stiffen the resistance of the frondeurs. Then, on Thursday, the day after the interview, a new book harshly critical of the president’s leadership appeared. The author was Cécile Duflot, a leader of the Green Party, who had been the environment minister until she walked out in protest, ending her party’s coalition with the Socialists.
On Friday, Arnaud Montebourg, the minister of the economy, also spoke to Le Monde, openly repudiating the president’s “stay-the-course” rhetoric. Hollande had called for “an acceleration of the reforms,” but as far as Montebourg was concerned, the reforms were leading France straight into a wall—although unemployment was continuing to rise, the deficit was only getting worse, not better—and acceleration would simply increase the damage. On Saturday, education minister Benoît Hamon joined Montebourg in calling for a change of policy, and on Sunday evening the two appeared together at Montebourg’s Festival of the Rose, an annual event in which he celebrates socialism in his Burgundian fiefdom with lofty rhetoric lubricated by good red wine.
For Prime Minister Manuel Valls, the sight of his two ministers on the evening news, wine glasses in hand, jocularly proclaiming loyalty to a president whose policy they simultaneously denounced, was the last straw. He had made “governmental solidarity” a tenet of his leadership and had no intention of tolerating the open insubordination that had made his predecessor, Jean-Marc Ayrault, with whom Montebourg had previously locked horns, a laughingstock. On Sunday night he informed the president that it was “either Montebourg or me,” and on Monday morning he announced the dissolution of the government.
Montebourg’s exit was no accident, however. He had been preparing to leave the government for some time, and Hollande’s ill-considered Le Monde interview provided him with the pretext. It is no secret that Montebourg wants to be president, and with Hollande’s popularity at a low ebb and no obvious way to recover between now and the Socialist presidential primary in 2016, he is likely to be forced to step aside. In that case, the leading contenders to succeed him are none other than Prime Minister Valls, who is popular with the right wing of the Socialist Party, and Montebourg, who is popular with the left wing. By precipitating a showdown with Valls, Montebourg has shown his colors and hopes to reap the benefit. Meanwhile, Valls has seen his own approval rating decline by 20 points since he took office to a low of 36 percent last week.
Although Montebourg accomplished little in two successive governments, first as minister of economic redressment under Ayrault and then as minister of the economy under Valls, he did garner favorable publicity by opposing several threatened takeovers by U.S. firms and expressing support for beleaguered steel and autoworkers. The Frankfurter Allgemeine Zeitung has called him, harshly but not inaccurately, “the Hotspur of the Left,” while also alleging that he was “the powerless accompanist of the industrial demise of la Grande Nation.” Such fatuous hyperbole from a powerful organ of German conservatism is interesting, because this week’s events have as much to do with the shifting political climate in Europe as with presidential rivalries in France.
If Hollande is under pressure at home to change course on economic policy, Angela Merkel is under pressure from several quarters to do the same. Matteo Renzi, the new Italian leader, has called on Germany to do more to aid the suffering economies of southern Europe. Mario Draghi, the head of the European Central Bank, noted last week at the Federal Reserve Bank’s Economic Symposium in Jackson Hole, Wyoming, that while the ECB has been doing a great deal to prevent Europe from sinking into deflation, European governments, Germany foremost among them, have failed to match monetary policy accommodation with the necessary fiscal stimulus. And Christine Lagarde at the International Monetary Fund has warned of the danger of inaction. Montebourg alluded to this change of climate in Europe in his Le Monde interview. Since Hollande failed to seize the moment, Montebourg would do so in his stead. He also made a point of praising German vice-chancellor Sigmar Gabriel, hinting at contacts between the two. Unlike Montebourg, however, Gabriel has no obvious interest in upsetting the status quo. No one has benefited more than Gabriel from Germany’s current Grand Coalition. His Social Democratic Party has reaped the credit for passing Germany’s first minimum wage law.
A beleaguered François Hollande may now be hoping for a tangible gesture of support from Merkel for having been such a staunch supporter of German austerity policy. Merkel may be too distracted by the troubles in Ukraine to help out in France, however. But it is hard to see how the open split in the French left can do anything but increase the pressure on Merkel to recognize that austerity has not achieved the desired results and may now be exerting a substantial drag on Germany’s hitherto unstoppable economic engine: German GDP declined by 0.2 percent last quarter. France’s parochial troubles may then be merely the latest indication that a deep-seated European crisis continues to simmer and may boil over at any moment.