French president Francois Hollande’s new Socialist-led government adopted a 30% pay cut today, a gesture of shared sacrifice by leaders who must now reduce the country’s massive debts and tackle spiralling unemployment.
The new cabinet’s first meeting, just a week after conservative former leader Nicolas Sarkozy last convened his government, marked a sharp shift in France’s power structure and strategy for solving Europe’s debt crisis and managing the economy.
The new finance minister reduced hopes in some other European capitals that Mr Hollande would drop his demand for a renegotiation of a hard-won European treaty on trimming budgets.
Pierre Moscovici said after taking control of the finance ministry: “The treaty will not be ratified as is. It must be added to, completed with a growth amendment.”
Mr Hollande, elected on May 6, has said the treaty focuses too much on spending cuts that are stifling growth and making the debt crisis worse, and argued for stimulus spending as well.
He and the leaders of Germany, Britain, Italy and the European Union held a conference call today to discuss Europe’s economic strategy ahead of the Group of Eight summit in the United States.
Mr Hollande leaves for Washington tonight for a meeting with President Barack Obama, and then attends the G8 and Nato summits.
He promised during his election campaign to protect France’s elaborate social benefit system – even vowing to roll back some of Mr Sarkozy’s cuts – while also continuing to trim the country’s deficit.
France has not balanced a budget in nearly 40 years, and Mr Hollande has promised to eliminate the deficit in 2017.
It will be a difficult balancing act for the Socialists, who are taking power in the middle of a global economic slowdown and Europe’s debt crisis.
France’s gross domestic product (GDP) did not grow in the first quarter of the year. Economists say growth will require deep reform to France’s inflexible labour market and it is unclear if Mr Hollande is willing to take that on.
Mr Moscovici said on television today: “A country that is indebted is a country that grows poorer. But responsibility and growth are not mutually exclusive.”
Ministers leaving the cabinet meeting said the government started by adopting a 30% pay cut, making their gross, pre-tax salaries £8,000 a month instead of £11,400.
The president and prime minister pledged to do the same, but that has to be confirmed in a formal law. The president’s salary will shrink from £17,000 to £12,000 a month before taxes and social charges.
The ministers also signed an ethics charter – unprecedented for a French government – pledging to spend less money to lead their ministries, to take trains instead of planes on medium-range travel, to avoid any conflict of interest and to be transparent about government actions.
Half of the 34 members of government are women. It includes Socialist heavyweights with government experience as well as many new faces. One, Fleur Pellerin, junior minister for small business, admitted afterwards that the meeting was a bit “intimidating” for newcomers.
As a series of handovers of power took place today, the emphasis seemed to be more on enhancing or at least protecting benefits than on cutting spending.
Employment minister Michel Sapin said his major challenge would be reducing unemployment that has reached 10% and allowing people who started working at a young age to retire earlier than a law passed under Mr Sarkozy currently allows.
Mr Sarkozy faced down unions and strikes to push the retirement age to 62 from 60, saying it was the only way to save the system.
Mr Sapin said: “We need to, as quickly as possible, put an end to the flagrant injustice put in place by the previous government. What’s on the agenda is to ensure the sustainability of our social benefit system that will allow retirees to live.”
The new government will also confront major international questions, like Mr Hollande’s promise to withdraw troops by the end of the year from Afghanistan.
Defence minister Jean-Yves Le Drian, an old friend of Mr Hollande, and foreign minister Laurent Fabius, a former prime minister, will surely wade into that debate, which will be raised at a Nato summit this weekend in Chicago.
Many Nato partners are unhappy with Mr Hollande’s decision. France had previously committed to keeping troops in the country until next year – already a faster withdrawal than the alliance’s timetable.