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Published: Wednesday January 15, 2014 MYT 3:40:12 AM
Updated: Wednesday January 15, 2014 MYT 3:40:12 AM

France to cut 50 billion euros in spending in 2015-17 - Hollande

PARIS (Reuters) - French President Francois Hollande said on Tuesday he would cut public spending by 50 billion euros (41 billion pounds) in 2015-17 and ease the tax burden on companies by phasing out hefty family welfare payroll charges.

The pledges followed a New Year's address in which the Socialist president vowed to accelerate reforms geared at shrinking the public deficit, reviving growth and reducing record joblessness in Europe's number two economy.

"In 2014, this year, we will save 15 billion (euros)," Hollande told a news conference at the Elysee presidential palace. "In 2015 to 2017 we will unblock 50 billion more. This has never been done before."

The savings would be achieved by a thorough review of all public spending, including the operations of local authorities, though France's social welfare model would be preserved.

Hollande said 18 billion euros would be cut in 2015, 18 billion in 2016 and 17 billion in 2017 - a slight acceleration of the pace laid out in previous budget plans but barely half of the 80 to 100 billion euros in savings which many economists say are needed.

The deficit is due to fall to 3.6 percent of gross domestic product this year, and below the EU's 3 percent ceiling in 2015.

Hollande detailed several measures designed to help companies regain a competitive edge in terms of labour costs, taxes and regulatory complexity in exchange for precise commitments on hiring and job training.

"France must not only regain growth in 2014, but growth that is as strong as possible," he said. "There is a simple principle which is to reduce costs for companies, reduce constraints on their activity and in exchange open the way to more hiring."

He said family welfare charges paid by employers and the self-employed - a longstanding pillar of social funding - would be phased out by 2017, reducing the corporate tax burden by 30 billion euros, but family allowances would not be reduced.

He also said he opposed reducing the generous size and two-year duration of unemployment benefits, saying the high jobless rate made the timing inappropriate.

He did not spell out how family benefits would be funded in future but hinted it might be by replacing over several years a tax credit he introduced to bolster companies' competitiveness.

Hollande, who raised taxes in his first year to curb the deficit under pressure from European partners, said the overall tax burden would start to fall in 2015 and companies would have a clear picture of future tax changes until 2017.

While no major crackdown on welfare fraud was needed, the government would act to reduce waste in the health system by cutting back on pointless medical visits and prescriptions and increasing use of generic medicines, he said.

In return for the pro-business measures, Hollande said companies would have to commit to hiring targets, notably for young people and older workers, as well as job training.

The government would put a roadmap for reform to trade unions and employers as the basis for negotiations to agree on targets that would be turned into law by parliament later this year, he said.

($1 = 0.7324 euros)

(Reporting By Nicholas Vinocur, Alexandria Sage and Jean-Baptiste Vey; Editing by Paul Taylor)

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