French government to cut staff, operating costs: PM

Reuters News
Posted: Jun 28, 2012 2:28 PM
French government to cut staff, operating costs: PM

PARIS (Reuters) - France's new Socialist government will cut staff at most ministries by 2.5 percent annually for the next three years as it seeks to reduce its budget deficit to meet European Union targets, the prime minister's office said on Thursday.

Prime Minister Jean-Marc Ayrault also wrote in a letter to the ministries that government operating costs - which exclude staffing but cover things like car fleets and office supplies - would drop by 7 percent on average in 2013 versus 2012.

Ayrault, however, did not provide a target figure for overall central government spending.

Ayrault is poised to submit an adjusted budget to his cabinet on July 4, with an expected 7.5 billion euros in tax hikes to counteract lower state revenues due to flagging growth, government sources have told Reuters.

Economic growth is falling short of a 0.7 percent estimate on which the previous conservative government had based its 2012 budget, making it crucial to curb spending while raising new revenues.

France's six-week-old government has vowed to steer clear of austerity measures, but still needs to plug a budget shortfall of 7-10 billion euros if it wishes to meet its deficit target of 4.5 percent of gross domestic product for 2012.

To comply with an EU-mandated deficit target of 3 percent in 2013 the government will likely need to find some 20-30 billion euros, depending on the level of economic growth.

Ayrault said the government's operating costs in 2014 and 2015 would each drop by 4 percent over 2013 and 2014, respectively.

Also on the chopping block, and included in the operating cost target, are special funds given to ministries that help pay for one-off contingencies, such as subsidies to farmers or employment incentives.

The health, education and interior ministries - which the Socialists have identified as priorities - will be excluded from the staff reductions.

But the Socialist government is still committed to a campaign pledge of creating 60,000 new teaching jobs over his five-year mandate, a move that is sharply criticized as impractical and expensive by the opposition.

Labor Minister Michel Sapin has said that, taking the new hirings into account, the overall level of government staffing will remain flat.

Immediately upon taking office, President Francois Hollande cut his own pay and that of his ministers by 30 percent, a symbolic move to show that France was committed to controlling government spending.

(Reporting By Elizabeth Pineau, writing by Nick Vinocur and Alexandria Sage; editing by Daniel Flynn, Ron Askew)