ON A leafy business-school campus on a wooded plateau south of Versailles, tanned French corporate bosses gather for a think-in at the end of every summer. Organised by Medef, the French employers’ federation, the get-together usually feels like corporate group therapy: a sort of collective lament for French economic weakness, and a chance to talk up confidence.

This year the two-day gathering at Jouy-en-Josas, considered enemy territory by much of the French left, was taken aback. Manuel Valls, France’s Socialist prime minister since March, turned up not to harangue fat-cat bosses, nor denounce corporate profits, but to charm them. “I know that it’s customary to oppose the left and business,” he began, but “France needs you.” A single phrase from his speech grabbed headlines the next day: “I love business.” The assembled bosses leapt to their feet to applaud. The left didn’t.

Elsewhere in Europe, it might not cause a stir for a centre-left politician to make such a declaration. But for some of Mr Valls’s colleagues, his words amounted to an act of provocation, if not of heresy. It was, harrumphed Laurent Baumel, a backbench Socialist deputy, “an ideological proposal that breaks with everything we have believed in on the left for decades.”

For those like Mr Baumel, this was not Mr Valls’s only offence. In a government reshuffle the previous day, the prime minister had evicted as economy minister Arnaud Montebourg, standard-bearer for the party’s left and author of a book arguing for “deglobalisation”, replacing him with Emmanuel Macron, a former investment banker. “He’s an ex-banker from Rothschild!”, charged a television interviewer that evening, in a tone of deep affront. Eh alors? (So what?) fired back Mr Valls.

Reform without decision

It is easy to miss that an important shift has taken place at the heart of French government. There has been no new general election, no change of parliamentary majority. François Hollande, the Socialist president elected in May 2012, still leads the country, and his popularity keeps sinking: at 13%, his poll rating is the lowest recorded by any president since the Fifth Republic was established under Charles de Gaulle in 1958. Yet without anyone taking a big strategic decision to alter the direction of the country France has muddled its way into getting one of the most reformist governments it has known for years.

One by one, prominent left-wingers wedded to anti-market rhetoric have quit (such as Cécile Duflot, the former housing minister) or been expelled (such as Mr Montebourg). Into their shoes have stepped pragmatic centre-left figures more at peace with the market economy, while reform-minded moderates have taken up senior advisory jobs.

The most emblematic shift was the appointment of Mr Valls himself, a 52-year-old maverick who has long urged the left-wing French Socialist Party to align itself with the centre-left social democracy of its European counterparts. He cut his teeth as parliamentary attaché for Michel Rocard, the prime minister in 1988-91, and watched him try and fail to impose his centre-left ideas on the old-fashioned socialism of François Mitterrand, then France’s president. More than any other Socialist leader today, Mr Valls embodies the Blairite doctrine that wealth must be created before it can be redistributed, and that France, which has not balanced a budget since 1974, has lived “for too many decades beyond its means.”

Such views, which pass for common sense elsewhere on the European left, come as a shock to a Socialist Party that “has not adapted its thinking to a changing world”, as Mr Valls puts it. In “Pouvoir” (Power), a book he published in 2010, he accused the party of being so “drunk with the saga” of fighting globalisation and ultra-libéralisme that it forgot to work on ideas or prepare to govern. When Mr Valls once suggested that the word “socialist” be dropped from his party’s name, he was told tartly by Martine Aubry, the leader at the time, to keep his mouth shut, or quit. Now in office, Mr Valls is on a mission to reconcile the left with business. “What counts,” he declared just before a parliamentary vote of confidence last month, “is efficiency not ideology.”

Mr Valls is joined by a number of centre-left ministers, among them Mr Macron, who resigned as Mr Hollande’s economic adviser earlier this year, having spent his time in that job trying to steer the president towards the moderate left. When Mr Macron first learned of Mr Hollande’s 2012 campaign promise to impose a top income-tax rate of 75%, he muttered in dismay: “It’s Cuba without the sun!” Other pragmatic figures occupy advisory posts. Among them: Laurence Boone, a former economist at Bank of America Merrill Lynch, who is now Mr Hollande’s economic adviser; Jean-Pierre Jouyet, Europe minister under Nicolas Sarkozy, the former centre-right president, who is now the presidential chief-of-staff; and Jean Pisani-Ferry, an economist and former head of Bruegel, a think-tank in Brussels, who runs Mr Valls’s economic-strategy unit.

The new team is engineering a shift in economic policy not unlike that under Mitterrand, who made a sharp U-turn in 1983, also after two years in office. Like Mitterrand, Mr Hollande has so far spent most of his time making matters worse. Having declared during his campaign that the “world of finance” was his enemy, and promised his 75% top tax rate, Mr Hollande increased taxes by €30 billion ($40 billion) in his first year. He reversed some of Mr Sarkozy’s popular work-friendly policies, such as tax-free overtime. He sent out mixed messages to foreign investors and entrepreneurs. He failed to curb public spending. And he brought in new rules that choked growth in sectors such as construction.

On Mr Hollande’s watch, the overall tax take grew from 43.7% of GDP in 2011 to 46% in 2013. Annual income growth in 2012-14 has averaged a mere 0.4%. Unemployment, which Mr Hollande had promised to bring down, edged up to over 10%. Confidence collapsed, investment was put on hold, and many of the rich left for Brussels or London. To take but one example of the damage Mr Hollande has wrought, new rent-control rules designed by Ms Duflot (who refused to serve under Mr Valls because she considered him too right-wing) have battered the construction industry. In the two years to January 2014, new housing starts fell by nearly a quarter.

Now the government has gone into reverse. It has embraced a business-friendly mix of policies in a bid to revive the private sector. This may stop short of what the economy needs to get back on its feet, but it contains a decent dose of common sense. In 2015 a cut in the hefty social charges paid by employers will come into full effect, in an attempt to encourage hiring. Savings of €21 billion will be squeezed out of public spending, including €9.5 billion from the social-security system. Perhaps most symbolic of all, the 75% top tax rate, set up initially as a temporary two-year measure, will be quietly allowed to die.

At the same time, the government wants to permit greater flexibility in order to boost competition. Mr Macron plans to ease the rules on Sunday trading, and is piloting a law to end the monopolies held by certain professions, such as notaries and pharmacies. Today, for instance, it is illegal to sell aspirin or paracetamol in an ordinary French supermarket. In a country whose labour code runs to 3,648 pages, more than twice the length of Victor Hugo’s epic, “Les Misérables”, the government is planning to simplify labour laws, for example by loosening rules governing works councils in companies. France has twice as many firms with 49 employees as it does with 50, reflecting onerous obligations that require firms with 50 workers to have a works council and a hygiene-and-safety council on such mundane matters as changing the office furniture.

The government is planning to make those claiming unemployment benefit more active in seeking jobs (at the moment, the rules are undemanding and rarely enforced). And, in a symbolic twist, Mr Valls has begun to unpick some of the dafter constraints of Ms Duflot’s rent-control law, in order to boost construction.

“The last time we heard such a pro-business discourse was in 1995 under Alain Madelin,” says Bruno Cavalier, an economist at Oddo Securities, referring to the Liberal finance minister during Jacques Chirac’s first term as president. “And he lasted only three months.” Weary business chiefs, who these days focus on investing abroad, are heartened by the shift of tone under Mr Valls. “He’s brave, pragmatic and has understood that business is fundamental to the future prosperity of the country,” says Pierre Gattaz, head of Medef.

Mr Valls is now taking his message to other European capitals: after visiting Berlin last month, he will be in London on October 6th. The hope is that he will persuade his counterparts that, this time, France is serious—and should be cut some slack on deficit reduction. “France needs to reform for its own sake. We are asking nothing from Germany,” he says. “But I can understand that the Germans, who did reform, ask themselves whether they believe the French. That’s why I need to show results.”

It will be an extremely tough sell. France has already confessed that its budget deficit will rise this year to 4.4% of GDP, from 4.3% in 2013, and so will require yet another delay (to 2017) before meeting the deficit ceiling imposed on members of the euro zone, which is 3%. Public debt this week topped €2 trillion, or 95% of GDP, for the first time. Mr Valls is under pressure not only from Germany but the European Commission and other European states which have undertaken far more painful reforms. There is growing impatience, bordering on exasperation, about France’s inability to stick to its word, or get on with making changes.

Now for the hard part

What are the chances that it might be serious this time? Hopes are vested, essentially, in the political leadership of one man, Mr Valls. As a politician, nobody doubts his energy and steeliness. With a clenched jaw and rare smile, the Barcelona-born Mr Valls has carved out a reputation as a no-nonsense decision-maker. When he was Mr Hollande’s interior minister, he applied a tough line on immigration that appalled some on the left, but turned him into the most popular serving Socialist politician. “He is half-Spanish and half-Swiss Italian,” comments one friend. “This gives him the strong will of the Mediterranean south, and the common sense of the Alps.”

There is also some evidence that the French themselves, faced with persistent stagnation and high unemployment, are beginning to realise that their social model needs fixing; that their high level of public spending is no longer a guarantee of good services; and that some of the measures they have built up to make existing full-time jobs secure in practice deter employers from creating new work. In one recent poll, fully 61% said that the legal 35-hour cap on weekly hours worked should be adjusted. In another, 56% agreed that public spending needed to fall.

Moreover, the economy is not in such a mess that repair is beyond reach. Recession in France was less deep than in Germany or Britain, and French GDP recovered to its pre-crisis level before Britain’s did. Productivity per hour worked is the same as that in Germany, and ahead of Britain’s—although the number of hours worked per person is lower. The country boasts more Fortune 500 companies, in sectors from insurance (AXA) to retailing (Carrefour), than Germany. And some elements of public spending—such as public-sector child care and nursery-schooling—make it easier for mothers to return to work, thus contributing to the employment rate.

The best hope would be that Mr Valls uses the next few months to push ahead with his reform programme, taking the gamble that his own long-term political future would be best secured by putting boldness before short-term popularity. Having survived two parliamentary votes of confidence, he has a moment of legitimacy in which to press ahead. Socialist deputies, at least for the present, do not want to bring down the government and provoke fresh elections because many would lose their seats overnight.

How long will they give Valls? Yet Mr Valls is having to manoeuvre within an extremely tight space. He lacks an organised political base, is an outlier within his own party, and owes his position to Mr Hollande rather than to any electoral mandate. To get a measure of his isolation, it is worth recalling the score Mr Valls secured among party supporters when he ran in the Socialists’ 2011 presidential primary, arguing that France was about to face the most testing period since the end of the second world war. He picked up just 5.6% of the vote. Then, party voters preferred the promise of a Utopian tomorrow. Now, the force of dissidence remains strong within his own ranks: at the most recent vote of confidence, fully 31 of his own deputies (more than 10%) abstained. To make matters worse, Mr Hollande was not elected to put in place this programme either. In his most famous campaign speech, before a wildly cheering crowd in Le Bourget, candidate Hollande declared war on the “world of finance” and denounced the “grasping and arrogant” rich, in a direct appeal to the left’s anti-capitalist reflexes. In a rousing hour-long performance, he only mentioned the word “competitiveness” once. And, upon election, he made no attempt to temper expectations about growth, spending and jobs. “We should have stressed, as soon as we took office, the real state of the economy,” Mr Valls says. “We didn’t do this. It was a strategic error.”

Dutch disease

Instead, the government lost two years and the prime minister now faces what might politely be described as the Hollande problem. When the president’s poll ratings were merely poor, there was still a chance they might recover. But there is no precedent for the speed with which the French have given up believing in Mr Hollande. Mr Sarkozy was loathed on the left, but never saw his poll rating drop below 28%; Mitterrand’s bottomed out at 22% (see chart). The link between the French and Mr Hollande looks beyond repair.

On domestic policy, the French no longer respect his presidency, nor trust his word. Mr Hollande vowed to bring down unemployment and save two iconic blast furnaces in Alsace-Lorraine; yet joblessness has increased, and the blast furnaces are cold. He has repeatedly promised an economic upturn; yet the economy recorded no growth in the first half of 2014. Perhaps most damaging of all, two former ministers, Mr Montebourg and Ms Duflot, as well as the former First Lady, Valérie Trierweiler, whose tell-all book has become a bestseller, have published scathing words about him. A chilling poll suggested that, were Mr Hollande to reach a second-round run-off against Marine Le Pen of the populist National Front, he would lose.

Of course, there is rarely a good time to reform France and this is no exception. The French are distrustful and despondent. Driving-test examiners went on strike in September, protesting against plans for shorter tests. Pharmacists shut their doors for a day this week in a protest at planned liberalisation. Air France’s well-paid pilots gave a potent demonstration of how difficult it can be to shift working practices in France when they staged a crippling two-week strike in protest at the expansion of the airline’s low-cost operator.

French politics, long prone to unpredictable twists, is entering a particularly unstable period. Mr Sarkozy’s comeback, starting with his steamroller campaign to take over the centre-right UMP party in November, will sharpen opposition to Mr Valls. At the same time, Ms Le Pen’s ascendancy is remodelling the political landscape into a three-party configuration, in which the National Front shifts from being a fringe movement to a party of (albeit limited) power. The front won two Senate seats on September 28th, the first in its history; it is now the single most popular party among working-class voters, 90% of whom disapprove of Mr Hollande.

So Mr Valls has little time, no growth, fragile support and almost no political legitimacy for what he is bravely trying to do. His own popularity has begun to slide as he becomes more intimately tied to Mr Hollande: from 58% when he took office to 35% today—good only when compared with the president. Some of his friends wonder privately whether he will stick around for very long. Over the coming months, the calculation for Mr Valls is both daunting and simple. The French may not thank him in the short run for nudging them out of their comfort zone. But they will most certainly blame him in the long term if he fails to give it a proper try.