French PM appeals to rebel Socialist lawmakers on savings plan

Reuters News
Posted: Apr 28, 2014 8:26 AM

PARIS (Reuters) - French Prime Minister Manuel Valls sought to appease rebel Socialist lawmakers on Monday, offering to exempt the country's poorest from a welfare spending freeze intended to address EU criticism of its budget.

The Socialist government has already approved a 50 billion euro ($69 billion) savings plan and pledged to bring its public deficit under 3 percent of economic output by the end of next year, under pressure from France's European Union partners.

But Valls, who took office last month in a government shakeup, must overcome opposition from Socialist lawmakers voting on the plan on Tuesday before he can send the program to Brussels. Europe's executive arm has already granted France two extra years to bring its deficit below the EU limit and hinted that no further time would be granted.

"My method is responsible dialogue, and my constant concern which I know you share is that efforts be fairly distributed," Valls wrote in a letter to Socialist deputies. "That's social justice."

Several lawmakers in the Socialist majority threatened last week to vote against the savings plan or abstain unless the government made a gesture for the poor. To avoid an embarrassing setback, Valls proposed to exclude benefits for the poor and pensioners earning less than 1,200 euros per month - 6.5 million people - from a one-year freeze on welfare spending.

In further concessions he said the RSA subsistence wage would start to rise in September by 10 percent over five years, benefits for single parents would rise, the minimum wage would increase starting next year and fiscal measures geared at strengthening purchasing power would be announced this year.

One union has announced plans for a public services strike on May 15 to protest against a partial freeze on civil servant wages. Valls offered to review the freeze each year until the end of President Francois Hollande's term in 2017 to see if economic conditions would allow it to be lifted.

Economists are skeptical as to whether the government will succeed in meeting its deficit-cutting target with the savings plan, which does not actually reduce public spending currently at 57 percent of gross domestic product (GDP), but curbs its increase.

"We do believe that the Stability Programme should find a majority next week, thanks to concessions from the executive and some marginal support from the centrists and the centre-right," Deutsche Bank economist Gilles Moec wrote in a research note.

"But the episode will leave scars, and we expect the implementation of the stability programme over the remainder of Hollande's tenure to be subject to lengthy negotiations and possible watering down," he added.

While the government has said it would target the public health system, government real estate and regional bureaucracy to achieve its savings, the measures have yet to bite and opposition could intensify in coming months. ($1 = 0.7227 Euros)

(Reporting by Nicholas Vinocur, Editing by Alexandria Sage/Ruth Pitchford)