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Published: Tuesday April 8, 2014 MYT 5:43:07 PM
Updated: Tuesday April 8, 2014 MYT 5:45:49 PM

Valls seeks reform boost with French confidence vote

France's Prime Minister Manuels Valls arrives for the first cabinet meeting of the new government at the Elysee Palace in Paris, April 4, 2014. REUTERS/Philippe Wojazer

France's Prime Minister Manuels Valls arrives for the first cabinet meeting of the new government at the Elysee Palace in Paris, April 4, 2014. REUTERS/Philippe Wojazer

PARIS (Reuters) - New Prime Minister Manuel Valls will test France's political commitment to reform on Tuesday in a confidence vote that should allow the Socialist government to press ahead with a competitiveness drive.

Valls, appointed by President Francois Hollande last week after the ruling Socialists suffered a rout in local elections, is to detail plans to phase out 30 billion euros (24 billion pounds) in payroll tax on companies in exchange for hiring.

One of France's most popular politicians, Valls will outline his priorities in his first major policy speech at 1500 (1300 GMT), before the confidence vote.

Hollande's newly reshuffled government is facing growing resistance from erstwhile coalition partners the Greens, which broke from the government last week, and from the left fringe of 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.

"Failing to support the government (...) would be a political mistake," Le Roux, head of the Socialist group in parliament, told Europe 1 radio. "I am telling every deputy: failing to vote confidence is to think that there is a better alternative elsewhere."

Le Roux will meet with Socialist deputies and Valls one more time before the vote, he added.

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.

GREENS ON BOARD

French entrepreneurs also raised pressure on Hollande to spell out his plans to help business grow and hire workers.

"What we are saying to the President of the Republic is simple: pay attention to what's happening," Guillaume Cairou, head of the Club des Entrepreneurs, wrote in a statement.

"Listen to business, because to defend France is to defend its companies."

But 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.

Labour Minister Francois Rebsamen said France was committed to reducing its deficit but would seek to balance belt-tightening with measures to boost growth.

"What matters is the path and the path that's to be set today leads to lower public spending to reduce budget deficits," he told RTL radio.

Asked if France would seek to renegotiate the timetable it has agreed for deficit-cutting, he added: "We can negotiate, that is of course something that is negotiable."

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

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

Jean-Vincent Place, head of the Greens party group in parliament's upper house, told France 2 television that he would vote for confidence after a positive meeting with Valls.

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

(Reporting by Leigh Thomas and Nicholas Vinocur; editing by Ralph Boulton)

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