France to unveil pro-reform cabinet after rebel ministers ousted
By Ingrid Melander PARIS (Reuters) - France's prime minister will scramble to put together a new pro-reform government on Tuesday, a day after the surprise eviction of rebel ministers who had opposed budgetary rigour. Manuel Valls will seek as wide a basis as possible for his second cabinet in five months ahead of tough negotiations at home and with EU peers on France's 2015 budget and he is expected to try to poach politicians from other parties. An announcement is expected by late afternoon. Valls handed in his government's resignation on Monday after President Francois Hollande decided firebrand Economy Minister Arnaud Montebourg had gone one step too far by attacking his economic policies and Germany's "obsession" with austerity. Two of France's leading newspapers, the conservative Le Figaro and left-wing Liberation, summed up the mood on Tuesday with the exact same headline: "Regime crisis". Luc Chatel, caretaker leader of the main UMP opposition party, called for a vote of confidence on the new government but stopped short of demanding that Hollande dissolve parliament. Aurelie Filippetti, one of at least three ministers including Montebourg who will exit the government, played down speculation that the group would seek to lure away leftist deputies from the government camp and so undermine Hollande's fragile majority. "It's not our aim to provoke a government crisis. I will support the new government," the ex-culture minister told BFM-TV, saying she planned to focus her efforts on the depressed region of northeastern France where she is a Socialist deputy. Hollande used Monday's anniversary of the 1944 liberation of Paris from Nazi occupation to draw a parallel with modern-day France, "a country in ruins which found in itself the strength to pull itself up". "We will obtain nothing without efforts, without abnegation, without courage ... Even in the most difficult times, (political) will triumphs," Hollande, the most unpopular president since polling began, told a commemoration ceremony. POLITICAL RISK There is no growth in the euro zone's second-largest economy and the government has admitted it will not meet fiscal targets agreed with European Union partners including Germany. The latest sign of weakness came from France's depressed real estate sector on Monday, where new housing starts in July registered a 10.8 percent year-on-year fall to hit their lowest level since November 1998. Economists gave a guarded welcome to Montebourg's eviction, hoping it would bring a sharper focus to government. "This represents a welcome clarification of the economic strategy but it increases the risk of a political crisis," Barclays economist Philippe Gudin said. He said the most likely scenario would be for self-proclaimed rebel lawmakers in the ruling Socialist party to keep criticising Hollande's policies but without forcing snap elections -- if only for fear of losing their own seats. Montebourg, 51, an anti-globalisation campaigner who has often courted controversy in his time as minister since Hollande took power in 2012, told TF1 television he had not expected events to accelerate so quickly -- a sign he may not have expected his latest comments to lead to his dismissal. But he renewed his hard-hitting criticism of an economic policy based on cutting the public deficit and kickstarting growth by cuts in state spending totalling 50 billion euros and tax cuts for businesses over the next few years of 40 billion. "The whole world is begging us to put an end to these absurd austerity policies which are burying the euro zone deeper and deeper in recession and which will soon end up with deflation," he told a news conference on Monday at the finance ministry. (Additional reporting by Mark John)
