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French President Francois Hollande dissolved French government over economic policy

Aug 26, 2014 14:48 IST

French President Francois Hollande dissolved his government on 25 August 2014 after an open feud in the cabinet over the country's economic policy.

French Prime Minister Manuel Valls offered resignation of his Socialist government after the blunt remarks of French Economy Minister Arnaud Montebourg about the government's policies.

Hollande accepted the resignation and ordered Manuel Valls to form a new government by 26 August 2014. The new government is unlikely to include Arnaud Montebourg.

Background
France did not witness any economic growth in 2014 and increased rate of unemployment at 10 percent added onto it. The promises made by Hollande to cut taxes and make it easier to open and operate businesses slowed down due to the divisions in his Socialist party.

The debate among French socialists was on German-led model of fiscal austerity to spur growth in the economy. It asked for more government spending. On the other hand, country was under European Union pressure to get its finances in order by undertaking fiscal austerity measure along with restricted government spending.

However, French Economy Minister Arnaud Montebourg criticized this approach as a wrong way to foster growth and asked the government to spend more freely to create jobs. Montebourg pressed for the need of change in the economy policy against Hollande's decision that there would be no change in the government's economic policy.

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