PARIS - France's new Prime Minister Manuel Valls suffered his first setback as Green allies refused to take part in his government, due to be unveiled Wednesday.
President Francois Hollande nominated the tough-talking interior minister to the post on Monday after the ruling Socialists suffered a drubbing at municipal polls.
Valls replaces Jean-Marc Ayrault who had headed up a deeply unpopular government which struggled to create sorely-needed jobs and straighten out a battered economy.
"This is a trying, demanding, round-the-clock task but at the same time it is exhilarating," a visibly emotional Ayrault told Valls during a formal handover ceremony at the prime minister's official residence.
Wasting no time, Valls went to the Elysee presidency early Wednesday morning to hold what were thought to be final talks with Hollande on who will be included in the new government.
His much-awaited announcement will either take place before 0830 GMT when Hollande heads to Brussels for a EU-Africa summit, or after his return to Paris later in the day.
The 51-year-old faces an uphill struggle as France's new prime minister, not only having to bring down the country's jobless ranks which reached a record 3.34 million in February, but to iron out opposition to his appointment within the Socialist Party.
The former interior minister is very popular with voters across the political spectrum but his style and politics, compared to those of former British premier Tony Blair, have alienated more left-leaning members of the party.
Already, the Green EELV party jumped ship, announcing late on Tuesday that "EELV refuses to participate in a Valls government", despite the fact that the new premier offered to create an enlarged ministry overseeing the ecology, energy and transport that they could head up.
Who will be included, excluded?
Exactly who will be included in his new government remains a mystery, but there is speculation that the mother of Hollande's four children, Segolene Royal, will be recalled from the political wilderness to take part.
Foreign minister Laurent Fabius - who is also very popular among the electorate - and Defence Minister Jean-Yves Le Drian are almost certain to keep their posts.
But Justice Minister Christiane Taubira, who feuded with Valls when he was interior minister, could lose her position.
There has also reportedly been disagreement between Hollande and Valls over who will take over as interior minister.
Whatever the final decision, Valls's new government will have to deal with "an economic context that has deteriorated sharply", said Frederic Dabi of the Ifop polling institute, with a public deficit that remain stubbornly high after 22 months of Socialist rule.
Growth, meanwhile, is almost non-existent and the exasperation of the French was reflected in Sunday's municipal polls that saw the Socialists lose a whopping 155 towns and cities to the main opposition and far right.
Hollande has tasked Valls with implementing a package of pro-business policies known as the Responsibility Pact, which cuts taxes on firms that are widely viewed as hampering employment and growth, to be financed by spending cuts of 50 billion euros ($69 billion).
He also asked him to set in motion a new "Solidarity Pact" that would include steps to boost spending on education and health and reduce personal income taxes.
A survey of those who heard the speech found that a vast majority - 75 per cent - were not convinced by Hollande's message.
There was better support for Valls' appointment, with 10 per cent saying they were "very satisfied" with the selection and 40 per cent "fairly satisfied".
Valls to bring 'more leadership'
Economists say the critical question is whether the new government will continue to respect commitments to the European Union to reduce its public deficit from 4.3 per cent to 3.0 per cent of output, or put these targets aside and risk angering Brussels.
"I think France is well aware of its commitments. It's been given two years and there is obviously work to be done," Eurogroup chief Jeroen Dijsselbloem warned on Tuesday.
Ifop's Dabi said that policies aside, Valls was likely to have more of a handle on his ministers than his predecessor.
"Jean-Marc Ayrault's personal image is not too damaged," Dabi said. "But he had a leadership deficit on his ministers, there was the feeling that he didn't really manage his government." He pointed to the widespread feeling among the French that the government flip-flopped on issues and did not lead the country with a firm hand at a challenging time.
"Through his personality, his dynamism... Manuel Valls could bring more leadership over his ministers," Dabi said.