By William Horobin and Stacy Meichtry
PARIS--France's Economy Minister on Thursday announced a EUR6
billion plan to stoke domestic demand and calm Socialist-Party
ranks unhappy with President François Hollande's focus to date on
deficit reduction.
In an address laying out a road map for the euro-zone's
second-biggest economy, Arnaud Montebourg proposed tapping the
brakes on France's drive to narrow the public deficit and vowed to
clear away costly red tape that shields professional guilds from
competition.
The announcement marked a subtle, yet highly symbolic shift away
from the policies of Mr. Hollande, a Socialist, who has tried to
persuade French companies to increase hiring by lowering their tax
bill. Since the start of the year, Mr. Hollande has also taken a
scalpel to France's bloated public sector, forging a plan to
implement EUR50 billion in spending cuts over the next three
years.
"I propose changing our macroeconomic policy," Mr. Montebourg
said "It's not a question of abandoning the efforts on public
spending. It's a question of making them more useful, more
productive and better orientated toward growth."
It wasn't clear if Mr. Montebourg was acting with the
president's blessing. The minister was flexing his muscles for the
first time in his new role as steward of the French economy.
Earlier this year, Mr. Hollande reshuffled his cabinet, placing the
firebrand left-wing politician atop the economics ministry in
addition to his previous role as industry minister. Mr. Hollande's
office didn't respond to requests for comment.
Mr. Montebourg said a third, rather than roughly half, of Mr.
Hollande's planned spending cuts should go toward reducing the
deficit. The remaining two thirds, he said, should be split evenly
to fund tax cuts for households and businesses.
Mr. Montebourg also vowed to pass a law slashing red tape and
liberalizing professional services that the European Union says are
weighing down the country with cartellike practices. French
economic growth ground to a halt in the first quarter of this year,
after growing just 0.4% last year.
"Numerous professions in monopoly situations are capturing the
population's income," Mr. Montebourg said. The minister said the
planned law liberalizing professional services would free up EUR6
billion for consumer spending, though he didn't provide specifics
on how that would be achieved.
In recent months, Mr. Montebourg has focused his energy on
assuring France keeps its industry intact and jobs at home, waging
a battle to extract concessions from General Electric Co. in
exchange for granting the American industrial conglomerate
permission to buy most of French power and rail engineering group
Alstom SA's assets.
With the battle over Alstom behind him, Mr. Montebourg is
pivoting to France's beleaguered economy. At one point in his
address on Thursday, the minister took up the mantle of New Deal
economics, evoking the massive public spending programs that
President Franklin D. Roosevelt implemented in the 1930s to claw
the U.S. out of the Great Depression. "President Roosevelt said:
'Try something, and if it doesn't work try something else.' We too
we will try something different from European austerity," Mr.
Montebourg said.
Ignoring European etiquette that discourages national policy
makers from publicly pressuring monetary authorities, Mr.
Montebourg singled out the European Central Bank for criticism,
accusing the Frankfurt-based institution of not doing enough to
stimulate Europe's economy. Mr. Montebourg demanded the ECB drive
down the value of the euro and move to buy debt issued by euro-zone
countries, so-called quantitative easing, to spur economic
growth.
As industry minister, Mr. Montebourg long argued that ECB
policies were keeping the euro high and making French exports more
expensive. But the minister had appeared to temper his criticism
last month after the ECB cut its interest rates to record lows and
outlined a plan to encourage bank lending to businesses.
On Thursday, however, Mr. Montebourg reignited his criticism,
demanding the central bank stem European disinflation that
effectively is leaving French firms with pricing constraints that
erode their profit margins.
"In a context where inflation is historically weak it is
inevitable and unavoidable that the ECB asks itself questions and
goes even further in nonconventional monetary policy by at last
buying public assets if the euro still doesn't fall and growth
doesn't pick up in the euro zone," Mr. Montebourg said, adding ECB
is failing to fulfill its mandate of keeping inflation just below
2%.
"We have an ECB that doesn't respect its mandate of 2%
[inflation] as we are at 0.5% today, and the situation has become
dangerous in terms of deflation risk," Mr. Montebourg said.
An ECB spokesman had no comment.
Write to William Horobin at William.Horobin@wsj.com and Stacy
Meichtry at stacy.meichtry@wsj.com