France's government dissolved as rivals feud over economic policy

French President Francois Hollande dissolved the government on Monday after open feuding in his Cabinet over the country's stagnant economy.

Prime Minister Manuel Valls offered up his Socialist government's resignation after accusing the outspoken economy minister of crossing a line with his blunt criticism of the government's policies. Hollande accepted the resignation and ordered Valls to form a new government by Tuesday.

France has had effectively no economic growth this year, unemployment is hovering around 10 per cent, and Hollande's approval ratings are in the teens. The country is under pressure from the European Union to get its finances in order, but Economy Minister Arnaud Montebourg has questioned whether the austerity pressed by the EU will kick start French growth.

Hollande's promises to cut taxes and make it easier for businesses to open and operate have stalled, meanwhile, in large part because of the divisions among Socialists.

"A major change in our economy policy," was what Montebourg had said was needed, just days after Hollande had expressly said there would be no change in direction.

The minister's comments angered the Socialist leadership, which said Montebourg's job was to support the government, not criticize it from within.

"He's not there to start a debate but to put France back on the path of growth," Carlos Da Silva, the Socialist Party spokesman, told Le Figaro newspaper.

Montebourg's criticism of austerity — and his pointed remarks about German Chancellor Angela Merkel — have rankled before.

In an interview last week, after Germany's economy also showed signs of stagnation, Montebourg said France's neighbour had been "trapped by the policy of austerity." He went on to say "when I say Germany, I mean the German right wing that supports Angela Merkel. It's not France's job to align itself to the ideological axioms of Germany's right wing."

Montebourg represents the hard-left Socialist base, and his departure from the government is likely to anger many of the voters who brought Hollande to office in 2012. Since that time, France's economy has only worsened, and the sense of impending crisis weighs heavily.

French officials have already made clear that the deficit will again surpass the 3 per cent target set by the European Union, and are negotiating a delay.

Merkel on Monday declined to comment directly about the change in government but said she wishes "the French president success with his reform agenda."