Bloomberg News

Hollande Wins Confidence Vote as Minister Exit Adds Pressure

March 20, 2013

Budget Minister Jerome Cahuzac

The departure of Budget Minister Jerome Cahuzac is a particular blow for Hollande because the minister was in charge of pushing through 5 billion euros in spending cuts by the end of the month to appease the European Commission after the government said it would miss its deficit-reduction target this year. Photographer: Patrick Kovarik/AFP/Getty Images

French President Francois Hollande’s government won its first confidence vote even as the resignation of Budget Minister Jerome Cahuzac increased the political challenge of revamping Europe’s No. 2 economy.

The no-confidence motion against the government’s handling of the economy by the opposition Union for a Popular Movement was defeated with only 229 of 540 lawmakers voting in favor. The vote came as Cahuzac, 60, became the first minister to step down since Hollande won power in May, exiting amid an investigation into whether he had an undeclared Swiss bank account.

The opposition’s questioning of government policies and the departure of Cahuzac under a cloud underline the challenges faced by Hollande as he grapples with a stalled economy, unemployment at a 13-year high and European Union pressure to cut France’s budget deficit. Hollande’s approval rating fell 8 points in the past month and is at a record low for a president 10 months into his mandate, a BVA poll showed this week.

“There’s been bad news on unemployment, the deficit and growth,” said Celine Bracq, a pollster at BVA. “As long as there is no sign of evidence that his actions are working, his popularity can continue to drop.”

Cahuzac’s exit is a particular blow for Hollande because the minister was in charge of pushing through 5 billion euros ($6.5 billion) in spending cuts by the end of the month to appease the European Commission after the government said it would miss its deficit-reduction target this year.

“This poses a problem in that the timing is not good,” said Emmanuel Rivier, a pollster at TNS Sofres in Paris. “In the government’s favor, they have moved quickly with this resignation to protect their program.”

French Credibility

Cahuzac, who maintains his innocence, had been also responsible for clamping down on tax evasion.

Hollande’s ministers rallied to assure voters that the government won’t be driven off course in cost reductions.

“We remain in a phase of budget seriousness,” Industry Minister Arnaud Montebourg said on France Inter radio.

Bernard Cazeneuve, who will replace Cahuzac at the budget ministry, said the cuts are necessary for France’s credibility.

“We have to reduce public spending, that’s the line of the government,” he said on Europe 1 radio.

Hollande “expressed his confidence” at a cabinet meeting today that Cazeneuve will “continue the serious work carried out” by Cahuzac, government spokeswoman Najat Vallaud-Belkacem told journalists today.

Defending Record

The problem for Hollande is how to revive an economy ravaged by Europe’s debt crisis and a policy malaise symbolized by more than three decades of budget deficits.

With public debt above 90 percent of gross domestic product and rising, the economy is set for a second year of little or no growth, according to both the Organization for Economic Cooperation and Development and the European Commission.

The OECD said yesterday that unemployment will peak at about 11.2 percent next year after rising to 10.6 percent in the fourth quarter of 2012. The lack of economic expansion means the budget deficit is on track to be about 3.5 percent of GDP this year instead of the 3 percent that France had promised its European partners it would achieve.

Growing Unpopularity

About 35 percent of French voters approve of Hollande’s performance, down from 43 percent in February and 61 percent at the beginning of his mandate last May, according to BVA.

The poll is based on interviews with 1,139 adults March 14 and 15 and has a margin of error of about 2.5 percentage points.

UMP leader Jean-Francois Cope today charged Hollande and his prime minister, Jean-Marc Ayrault, with saddling the French economy with too many tax increases and choking off growth.

“You’ve made the irresponsible choice of imposing a fiscal shock,” Cope said today as he introduced the confidence motion. “You’ve strangled the French. They don’t spend, they don’t invest, they don’t hire.”

Ayrault replied that he’s acting to lower spending and embarking on a lasting overhaul of the economy after a decade in which Cope’s party held power and failed to act.

“We are trying to make historic reforms,” Ayrault said. “We’re undertaking a complete renovation of our social system and have begun a battle for jobs.”

Confidence Votes

The confidence vote was the first faced by Hollande’s cabinet. His predecessor Nicolas Sarkozy faced three such votes between 2007 and 2012.

Only one vote of confidence passed since its creation with the constitution of the Fifth Republic in 1958. It overthrew the government of Prime Minister Georges Pompidou in 1962 as it sought to pass the universal suffrage.

Hollande’s Socialist Party has 276 seats in the 540-seat National Assembly, constituting a majority that’s strengthened by the backing of allies who have another 32 votes. The opposition UMP has 186 seats.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net


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