'Take back my freedom' 

Echoing his weekend comments in stronger terms, the anti-globalisation advocate warned in a speech Monday that austerity measures were only prolonging and worsening a "serious, destructive and long" crisis in Europe.

"For two years, I fought tirelessly to convince, I wrote notes and letters to the head of the executive and made private and public declarations to attempt to convince and implore the president to refuse excessive measures for our country that risked damaging and sinking our economy," he said.

Acknowledging that he had failed to convince the president or prime minister, he said: "I believed it necessary to take back my freedom in the same way he (Valls) accepted to give it to me."

The 51-year-old left-wing minister is no stranger to controversy, having made headlines in the past for his outspoken criticism of Germany, which he has blamed for factory closures in France.

He was promoted to his current position in April in a government shake-up after the Socialist party suffered a drubbing at local elections, and has had to cosy up to Finance Minister Michel Sapin who supports the very austerity measures that he disagrees with.

As industrial renewal minister before his promotion, he had grabbed headlines by labelling the head of tyre giant Titan an "extremist" after the CEO criticised the French workforce as lazy.

He also became embroiled in a very public fight with steelmaker ArcelorMittal over the closure of a plant.

Socialist Party senator Richard Yung told The Local on Monday that Montebourg had "gone too far" this time.

"He crossed a line. You can say certain things but you can't give the impression you are outside the government, especially when you are the minister for the economy. People will look at this and think its balmy. And we don't understand it either."

Yung said the open criticism from ministers had caused "pandemonium" in the goverment.

Opposition figures reacted with shock to the unfolding events, pointing to a major crisis of confidence at the heart of the executive, with far-right leader Marine Le Pen even calling for the lower house National Assembly to be dissolved.

And former Prime Minister François Fillon said the dissolution of the government showed that Hollande's presidency was in "disarray". 

The crisis comes at a time when France is mired in stubbornly slow economic recovery, with high unemployment.

The central bank warned this month that Hollande had no hope of reaching his target of 1.0 percent growth for 2014.

The French economy has been stagnant for the past six months and the government was forced to halve its growth forecast to 0.5 percent for this year.