New French PM forms government as mammoth challenges await

France`s new Prime Minister Manuel Valls set about forming a new government on Tuesday tasked with the mammoth challenge of reviving a battered economy, as the EU warned Paris not to renege on its reform pledges.

Paris: France`s new Prime Minister Manuel Valls set about forming a new government on Tuesday tasked with the mammoth challenge of reviving a battered economy, as the EU warned Paris not to renege on its reform pledges.

President Francois Hollande nominated the tough-talking interior minister to the post on Monday after the ruling Socialists suffered a drubbing at municipal polls, replacing Jean-Marc Ayrault who had headed up a deeply unpopular government.

"This is a trying, demanding, round-the-clock task but at the same time it is exhilarating," a visibly emotional Ayrault said as he made way for Valls in a handover ceremony at the prime minister`s official residence, his former employees looking on, some with tears in their eyes.

Valls` firm stance on crime and his dynamism have made him popular with voters across the political spectrum but his style and politics, compared to those of former British premier Tony Blair, have alienated more left-leaning members of the Socialist Party.
The Green EELV party have already jumped ship, announcing late on Tuesday that "EELV refuses to participate in a Valls government," a parliamentary source told AFP. A new government is set to be announced on Wednesday followed by the first cabinet meeting on Friday, Hollande`s aides said.

Valls has to deal with "an economic context that has deteriorated sharply", said Frederic Dabi of the Ifop polling institute, with unemployment and a public deficit that remain stubbornly high after 22 months of Socialist rule.

Growth, meanwhile, is almost non-existent and the exasperation of the French was reflected in Sunday`s municipal polls that saw the Socialists lose a whopping 155 towns and cities to the main opposition and far right.

In a televised address on Monday, Hollande tasked Valls with implementing a package of pro-business policies known as the Responsibility Pact, which cuts taxes on firms that are widely viewed as hampering employment and growth, and imposes spending cuts of 50 billion euros (USD 69 billion).
He also asked him to set in motion a new "Solidarity Pact" that would include steps to boost spending on education and health and reduce personal income taxes.

A survey of those who heard the speech found that a vast majority -- 75 percent -- were not convinced by Hollande`s message. Pollsters Harris Interactive said only 2.0 percent were "very convinced" and 19 percent "fairly convinced".

There was better support for Valls` appointment, with 10 percent saying they were "very satisfied" with the selection and 40 percent "fairly satisfied". 

Economists say the critical question is whether the new government will continue to respect commitments to the European Union to reduce its public deficit from 4.3 percent to 3.0 percent of output, or put these targets aside and risk angering Brussels.

"I think France is well aware of its commitments. It`s been given two years and there is obviously work to be done," Eurogroup chief Jeroen Dijsselbloem said on Tuesday, echoing comments made by EU economic affairs commissioner Olli Rehn.Aside from a bleak economic reality, Valls also faces the challenge of ironing out divisions within the French left, particularly those who feel that the Socialists have adopted a pro-business stance at the expense of social issues.
Even before the EELV leadership decided to stay out of the new government, its ministers Cecile Duflot and Pascal Canfin had already said they would not take part. 

In a bid to ease concerns, Valls said Tuesday he would go "further" and "faster" as prime minister but acknowledged the demands for "social justice".

Exactly who will be included in his new government is unclear, but there is speculation that the mother of Hollande`s four children, Segolene Royal, will be recalled from the political wilderness to take part.

Dabi said the divisions should iron themselves out once a new government is formed, adding that Valls was likely to have more of a handle on his ministers than his predecessor.
"Jean-Marc Ayrault`s personal image is not too damaged," Dabi said. "He appears pleasant, competent, serious, close to the people, but he had a leadership deficit on his ministers, there was the feeling that he didn`t really manage his government."

He pointed to the widespread feeling among the French that the government flip-flopped on issues and did not lead the country with a firm hand at a challenging time.

"Through his personality, his dynamism... Manuel Valls could bring more leadership over his ministers," Dabi said.