French PM Manuel Valls has submitted the government's resignation to
President Francois Hollande and has been asked to form a new cabinet.
The government was badly shaken on Sunday by criticism over its
handling of the economy by economy minister Arnaud Montebourg.
Moments after Mr Valls's resignation Mr Hollande issued a statement.
He asked Mr Valls to set up a new cabinet "consistent with the
direction [Mr Hollande] has set for the country".
The prime minister had accused Mr Montebourg of "crossing a yellow
line" after the economy minister had attacked austerity measures which
he said were strangling France's growth.
Mr Montebourg told a meeting of Socialists in eastern France that the
time had come to put up a "just and sane resistance" to the "excessive
obsessions of Germany's conservatives".
On Saturday, he told Le Monde newspaper that Germany was trapped in an
austerity policy that it imposed across Europe".
He was backed up by education minister Benoit Hamon and appeared to
have the support of culture minister Aurelie Filippetti, too.
Mr Hamon called on Sunday for a revival in demand and for an end to
German Chancellor Angela Merkel setting Europe's direction: "You can't
sell anything to the French if they don't have enough income," he
said.
Manuel Valls became prime minister in March after a poor performance
by President Hollande's Socialist party in local elections.
Earlier this month, the French government admitted it would be
impossible to reach a previous growth forecast of 1%. Germany saw its
economy shrink by 0.2% between April and June.
Mr Montebourg told French radio shortly before Mr Valls announced the
government's resignation that he had no regrets about his remarks,
"first of all because there's no anger".
There was no debate about authority, he told Europe 1 radio, but a
"debate about economic direction".

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