World and Nation

French cabinet is dissolved, a victim of austerity battles

PARIS — The collapse of the French government Monday exposed widening divisions both within France’s leadership, and Europe more broadly, over austerity policies that many now fault for threatening to tip the eurozone back into recession.

Prime Minister Manuel Valls announced that he would dissolve his government after a rancorous battle in his Cabinet over whether the belt-tightening measures taken by President François Hollande — at the urging of Germany and European Union officials in Brussels — were impeding France’s recovery.

The dispute broke into the open when Valls’ outspoken economy minister, Arnaud Montebourg, insisted in an interview over the weekend that austerity had gone too far. “The priority must be exiting the crisis, and the dogmatic reduction of deficits should come after,” he told the newspaper Le Monde.

He also took direct aim at the policies of German Chancellor Angela Merkel. “Germany is caught in a trap of austerity that it is imposing across Europe,” he said.

The Cabinet reshuffle precipitated by those comments was the second major shake-up since Hollande took over the presidency in 2012. Since then, the French economy has been flat, and Hollande has been dogged by some of the lowest approval ratings for a French president in decades.

The government collapse did more than throw France’s politics into disarray. It also bared the growing disagreement between France and Germany — Europe’s largest economies — over whether Merkel’s prescription of austerity threatens to turn a five-year euro crisis into a long-term malaise of low growth and high unemployment.

The announcement in Paris coincided with a visit by Merkel to Spain, where she praised Prime Minister Mariano Rajoy for austerity measures that have included a freeze on public salaries and more flexible labor laws.

Asked about events in France, Merkel told reporters that she wished Hollande success, but she declined to comment on French domestic politics.

Last week, Hollande acknowledged the problems his government faced, saying in an interview with Le Monde that austerity policies the country had been compelled to follow to meet the eurozone’s budget deficit target had made it nearly impossible to achieve a recovery after six months of zero growth and more than a year of weak economic activity.

As a result, he said, France will no longer try to meet a deficit reduction target this year, and may fall behind on deficit reduction next year. Hollande acknowledged that growth is so weak in France that it was unlikely to rebound any time soon.