Valls seeks reform boost with French confidence vote

Reuters News
Posted: Apr 07, 2014 6:07 PM

PARIS (Reuters) - New Prime Minister Manuel Valls will test France's political will to reform on Tuesday in a confidence vote that will determine whether the government can push ahead with a competitiveness drive.

Valls, appointed by President Francois Hollande last week after the ruling Socialists suffered an election rout, is to launch plans to phase out 30 billion euros ($41 billion) in payroll tax on companies in exchange for hiring.

Valls, one of France's most popular politicians, is to outline his priorities in his first major policy speech at 15:00 (1300 GMT), before the confidence vote.

Hollande's newly reshuffled government is facing growing resistance from erstwhile coalition partners the Greens and from the left, even within his own Socialist Party.

Their backing is vital for what Hollande has dubbed his "responsibility pact", which includes plans to wring 50 billion euros in savings from the budget over three years.

"The French want action. We have to create the conditions for supporting growth," Valls said on Monday on i>Tele television, promising concrete plans.

His Finance Minister Michel Sapin said Valls would offer details about where the budget savings will come from. A government source said central state spending would account for nearly 20 billion euros, spending by local authorities 10 billion and another 20 billion would be from the welfare system.

Concerned France's deficit-reduction targets are slipping out of reach, the European Commission, the German government and credit ratings agencies all want to see precise details.

The new government has given mixed messages about whether it intends to stick to France's deficit targets and any delay in meeting them will be a hard sell in Brussels and Berlin.

Hollande's Socialists have 291 seats out of 577 in the lower house of parliament, but more than 80 backed a paper over the weekend calling for a change of policy after a drubbing in local elections last month.

The confidence vote could fail if there are more than 30 Socialist abstentions, although it also depends on what the Greens and other minor parties do.

To make Hollande's responsibility pact more palatable, the government is preparing to lower the welfare charge deductions from the pay of workers on low incomes and to increase a minimum welfare benefit payment.

(Reporting by Leigh Thomas and Emmanuel Jarry; editing by Andrew Roche)