France's Hollande Takes a Big Gamble

The president’s late decision to cut spending antagonizes his party

French President Francois Hollande on Aug. 25 in ParisPhotograph by Joel Saget/AFP via Getty Images

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By Carol Matlack

August 28, 2014 at 9:03 PM UTC

This article is for subscribers only.

This article is part of the September 1, 2014 issue of businessweek.

During his 27 months in office, French President François Hollande has consistently disappointed his countrymen with predictions of economic recovery that haven’t materialized. Now the beleaguered Hollande is trying to quell a revolt within his own Socialist Party.

On Aug. 26, he named a new cabinet, ousting ministers from the party’s left wing who attacked his plans to curb government spending and ease taxes on business. In an interview with Le Monde on Aug. 23, Economy Minister Arnaud Montebourg said it was “absurd” for Hollande to propose spending cuts when the economy has barely grown in three years and unemployment exceeds 10 percent. Three days later, Montebourg was out of a job, replaced by a 36-year-old supply-side reformer named Emmanuel Macron.