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President Hollande demands his government resign

CERNAY, FRANCE - AUGUST 3: French President Francois Hollande (L) and German President Joachim Gauck attend a ceremony at the memorial to the battles at Hartmannswillerkopf, as part of commemorations marking the centenary of World War I on August 3, 2014
CERNAY, FRANCE - AUGUST 3: French President Francois Hollande (L) and German President Joachim Gauck attend a ceremony at the memorial to the battles at Hartmannswillerkopf, as part of commemorations marking the centenary of World War I on August 3, 2014
Photo by Michele Tantussi/Getty Images

France, lagging behind most euro zone economic recoveries, slipped further into crisis mode Monday when leftist ministers rebelled against austerity, forcing Hollande to call for the resignation of government in order to select a new cabinet.

Outspoken Economy Minister Arnaud Montebourg had conducted a verbal assault on fiscal "austerity" largely imposed by by French Pres. Francois Hollande, and had attacked euro zone powerhouse Germany's "obsession" with taming government spending.

France is the second largest euro zone economy, and Hollande is the least popular president of France in modern history. Holland, who came to power on a promise of economic recovery, instead has overseen one of the slowest recoveries in the euro zone and unemployment remains extremely high across the country.

Despite Montebourg’s defiant and a very public row with Hollande, the president is yet to call for his resignation. Montebourg, as a presidential contender, will likely regroup with ousted leftist members of the Cabinet to form a political opposition group against Hollande.

Meanwhile, Hollande's office released a tightly worded statement saying Prime Minister Manuel Valls had handed in his government's resignation. The move means Hollande and Valls will need to reorganize the Cabinet to deal with a stalled economic recovery.

"The head of state asked him to form a team that supports the objectives he has set out for the country," the statement said. Political analysts say the change of course will involve tax cuts for businesses and further trimming of government spending to rein in a runaway public deficit.

The more conservative approach to the economy, some say, is the opposite fiscal direction that Hollande based his presidential campaign on. Nevertheless, conservatives in France are upset with Hollande for not doing enough to rein in government spending while the left is in full rebellion over austerity measures implemented and supported by Hollande’s administration.

Despite his government’s right turn in 2014, Hollande is more unpopular with conservatives than with its liberal base. To that end, opposition conservatives along with far-right National Front have called for an outright dissolution of parliament, according to a Reuters report.

"With half of the presidential mandate already gone, it doesn't bode well for the ability of the president, or whatever government he chooses, to take key decisions," said former Prime Minister Francois Fillon, one of handful of hopefuls for the conservative ticket in the 2017 presidential election.

As Economic Minister, Montebourg has managed to position himself to the left of Hollande, who is himself a socialist. Montebourg’s policy proposals veered sharply left after Hollande, in January, took a more conservative economic lean that included corporate tax breaks and a sharp focus on budgetary concerns.

Hollande further dismayed liberals and his own Socialist camp by seeking to repair relations with German Chancellor Angela Merkel's conservative government. Germany bears most of the debt burden for financial bailouts of euro nations, and relations between the two countries have been strained by France's repeated failures to meet budgetary targets it makes with the Brussels-based European Commission.

The latest presidential poll released over the weekend showed Hollande stuck at 17 percent, the lowest approval rating for any leader of France since its Fifth Republic was formed in 1958.

Analysts are calling Montebourg’s likely exit from Hollande’s administration a signal that he intends to run for president of France in the next election.

"Montebourg's exit resonates like real ambition for 2017, that's clear. It's a real political coup," said Martial Foucault, director of the Cevipof think tank.