–Lagarde Remains Finance Minister, Baroin Still Budget Minister

PARIS (MNI) – After long hesitation, France’s President Nicolas
Sarkozy decided Sunday to retain Francois Fillon as prime minister to
lead a streamlined cabinet in preparation for the general elections 18
months away.

The new government faces the daunting challenge of winning over an
electorate deeply disenchanted with a pension reform that triggered mass
protests and strikes in a period of unprecedented cutbacks in public
spending.

A staunch defender of fiscal consolidation since assuming office in
2007, Fillon is perhaps the best guarantee Sarkozy could offer to the
financial markets that the country intends to hold on to its triple-A
credit rating amidst the Eurozone’s sovereign debt crisis.

Among a handful of options, Sarkozy had appeared to settle on
Ecology Minister Jean-Louis Borloo to consolidate the centrist wing of
the governing coalition and lend the new government a more “social” hew.
But the former labor minister and champion of a vast program for
sustainable development remained too far behind Fillon in the opinion
polls to reassure the president of a boost to his upcoming re-election
battle.

Fillon was always the preferred choice of voters, especially those
of his own camp, to succeed himself at Matignon, the French prime
minister’s palace. A loyal and at times self-effacing deputy to the
president, he offered the French an image of composure and statesmanship
that often contrasted with Sarkozy’s frenetic volatility, and he managed
to retain close to 50% popularity in the polls while Sarkozy slid to
record lows.

Indeed, surveys suggest that Fillon would have a better chance than
Sarkozy to keep the conservative UMP party in power after 2012, given
his broader appeal to centrist voters. His origins in the “social” wing
of the party could allow the UMP to shore up its fraying flank on the
left, while Sarkozy attempts to halt the inroads of the rightwing
National Front into the xenophobic segment of the electorate that helped
tip the scales in his favor in the run-off with the Socialist candidate
Segolene Royal in 2007.

While Sarkozy is unlikely to relinquish the firm control over
policy he has maintained during his presidency, Fillon has gained a
certain independence and stature in recent months that could allow him
to give fresh impulses, as he himself stated, in the areas of economic
growth, employment, solidarity and security.

In the new cabinet, Christine Lagarde remains in charge of finances
and the economy, and Francois Baroin keeps control of the budget. Xavier
Bertrand returns to the Labor Ministry, replacing Eric Woerth, who is
still under judicial investigation in a conflict of interest and
influence peddling scandal involving Liliane Bettencourt, heiress to the
L’Oreal fortune. In moving over to the Labor Ministry, Bertrand will
relinquish the helm of the UMP to Jean-Francois Cope.

The unlucky Borloo declined to participate in the new government.
Whether or not he proves a sore loser — despite the inclusion of new
centrists in the cabinet — and decides to lead an offensive from the
center against Sarkozy in the first round of the presidential elections
remains to be seen.

–Paris newsroom +331 4271 5540; Email: stephen@marketnews.com

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