French government in turmoil over economic policies

French Prime Minister Manuel Valls on Monday (25 August) tendered his government's resignation after more leftist ministers voiced criticism to what is being perceived as German-imposed austerity.

The embattled French President, Francois Hollande i, whose popularity ratings are only 17 percent, accepted the resignation and tasked Valls to form a new cabinet by Tuesday, the Elysee palace said in a press release.

"The head of state has asked him [Valls] to form a team in line with the orientation he has defined for our country," the statement added - a reference to further budget cuts needed for France to rein in its public deficit.

The rebel minister, Arnaud Montebourg, who had held the economy portfolio until Monday, over the weekend criticised his Socialist government for being too German-friendly.

"France is a free country which shouldn't be aligning itself with the obsessions of the German right," he said at a Socialist rally on Sunday, urging a "just and sane resistance".

The day before, he gave an interview to Le Monde in which he claimed that Germany had "imposed" a policy of austerity across Europe and that other countries should speak out against it.

Two more ministers, Benoit Hamon i in charge of education and culture minister Aurelie Fillipetti, also said rallied around Montebourg and said they will not seek a post in the new cabinet.

In a resignation letter addressed to Hollande and Valls, Fillipetti accused them of betraying their voters and abandoning left-wing policies, at a time when the populist National Front is gaining ground everywhere.

According to Le Parisien, Valls forced Hollande to let go of Montebourg by telling him "it's either him or me." Montebourg was promoted from industry to economy minister earlier this year in a bid to appease the left-wing within the Socialist party.

Valls, who has been prime minister only since March this year after another reshuffle following a disastrous result in local elections, is expected to keep more centrist ministers and Hollande loyalists in his new cabinet, including finance minister Michel Sapin.

But apart from internal power struggles, the government turmoil is also a sign of diverging views on how to tackle the country's economic woes.

French unemployment is at nearly 11 percent and growth in 2014 is forecast to be of only 0.5 percent.

Meanwhile, French officials have already said the deficit will again surpass EU's 3 percent target, and are negotiating another delay with the European Commission.

The commission declined to comment on the new developments in France, with a spokeswoman saying they are "aware" and "in contact" with the French government.

German chancellor Angela Merkel i on Monday during a visit to Spain declined to comment directly about the change in government, but said she wishes "the French president success with his reform agenda."

Both Merkel and Spanish PM Mariano Rajoy i defended the need for further austerity and economic reforms, saying this boosted economic growth.

Since the start of the eurozone debt crisis in 2010, Merkel and her government were seen as the main drivers for harsh austerity measures imposed on southern countries in return for loans needed to avoid bankruptcy.

Hollande and Italian prime minister Matteo Renzi have been especially vocal in calling for a shift from austerity to more growth-friendly spending policies.

The head of the International Monetary Fund, Christine Lagarde i, a former French finance minister, also waded into the debate on Monday, saying Germany should spend more in order to help the recovery of the eurozone as a whole.

"What I think is very important for Germany is to participate in the recovery movement in a very intense way. It has the means to do so," she told Swiss public broadcaster RTS.