Valls picks investment banker as France's new economy minister

BRUSSELS - French Prime Minister Manuel Valls appointed Emmanuel Macron, a 36-year-old former merchant banker, as his economy minister on Tuesday (26 August), as he unveiled his new government

Valls, who was himself appointed by President Francois Hollande i in March, dissolved his administration on Monday after the left-wing economy minister Arnaud Montebourg criticised the government’s economic policies and accused Germany of having an “obsession” with budgetary austerity in two speeches over the weekend.

"France is a free country which shouldn't be aligning itself with the obsessions of the German right," Montebourg told a Socialist party rally on Sunday.

Macron, who was Hollande's top economic adviser until June and is regarded as being closer to French business, replaces Montebourg. The appointment is a clear signal that Hollande will not cede to the wishes of his party's left by u-turning on plans to reduce corporate tax rates and public spending and will stick to his deficit reduction pledges.

Finance minister Michel Sapin remains in post and has been charged with overseeing public accounts. Sapin has repeatedly promised that France will bring its budget deficit in line with EU rules even if it is likely to miss its 2015 target to bring it down to 3 percent of output.

Meanwhile, culture minister Aurelie Filippetti and education minister Benoit Hamon were other figures from the Socialist party’s left-wing to be left out of the new government as Hollande and Valls try to assert the dominance of the party’s moderate wing.

Dismal figures for the eurozone this month revealed that the bloc recorded zero growth between April and June, dealing a blow to hopes that 2014 would deliver a steady, albeit slow, recovery.

France flat-lined for the second quarter in a row, while Germany’s economy contracted on fears about the EU’s ongoing sanctions battle with Russia, and Italy fell back into recession.

Meanwhile, the euro fell to its lowest rat against the US dollar, at $1.315, in eleven months on Tuesday amid mounting speculation that the European Central Bank will soon announce a large-scale bond-buying programme - known as quantitative easing - in a bid to stimulate more economic activity. German authorities are also expected to report tomorrow that their inflation rates have stalled.