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Economy

Hollande replaces left-winger with banker in French cabinet reshuffle as economy fails to revive

media Outgoing economy minister Arnaud Montebourg hands over to his successor, Emmanuel Macron AFP/Eric Piermont

The second reshuffle of France’s government in five months signals a definitive breach by President François Hollande with the left wing of his Socialist Party. But it is also a sign that his economic policy has so far failed to return the country to growth and end unemployment.

There could be no more symbolic appointment than that of Emmanuel Macron as France’s economy minister, the highest-profile change in Tuesday's cabinet reshuffle.

A merchant banker who has worked for Rothschild’s replaces the troublesome and media-savvy Arnaud Montebourg, who opposed Hollande from the left during the Socialist Party’s presidential primaries in the run-up to the 2012 presidential election and came out against his current policies at the weekend.

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He had been promoted in the previous reshuffle, a sort of consolation prize to the left after party right-winger Manuel Valls was made prime minister that also had the advantage of roping Montebourg in to the government’s austerity-oriented economic policy.

But that business-friendly policy can only be described as a failure so far, although Hollande and Valls insist that it will bear fruit sooner or later.

Unemployment stands at nearly 3,398 million – a record high – and figures to be announced on Wednesday are not expected to see any improvement.

The business climate is getting worse, according to the Insee statistics institute, and growth is expected to be just 0.5 per cent for the whole of 2014.

Nor has the government reached its Brussels-set target for the reduction of the budget deficit, although it has been for that goal that it has angered the left with cuts of 50 billion euros between now and 2017.

Although Hollande denies that that is an austerity policy, Montebourg and the Socialist left – along with the Greens, who quit the government in the last reshuffle, and the hard left - argue that it is and, on top of that, that it is a betrayal of Socialist voters who expected an improvement of working-class people’s living standards.

They also claim that it is not setting France on the road to recovery but making things worse.

Less money in lower income pockets - because of cuts, unemployment and rises in the VAT sales tax, reduces demand - digging the economy deeper into depression, they argue.

Macron takes the polar opposite view.

He was one of the architects of Hollande’s Responsibility Pact, this year’s key economic initiative that, basing itself on supply-side economics, aimed to boost output by reducing businesses’ social security contributions by 40 billion euros in return for promises to create jobs.

Like Prime Minister Manuel Valls, Macron considers traditional socialist commitments, such as increasing working people’s spending power, outdated.

He has called for a “modern” supply-side socialism, which would boost profitability so as to increase production for the globalised marketplance, thus creating jobs.

Valls, too, is determined to project a business-friendly image – no sooner was his new cabinet chosen than he was off to the summer school of the bosses’ union, Medef, whose chief, Pierre Gattaz, has cautiously welcomed Macron’s appointment, while demanding more reductions in companies’ payments to the state.

Valls’s dramatic, if temporary, resignation, leading to the dissolution of the government and personal interviews with proposed ministers, amounted to a demand of a loyalty pledge from a cabinet purged of three dissidents.

And it was a clear declaration that there will be no change in the government’s economic policy, whatever the malcontents may say.

Read political reactions: New French government under fire from left and right

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