France to cut welfare spend by €9.5bn

France's Socialist government has detailed a €21bn cost-cutting plan, the biggest in the country's modern history, saying it will focus on trimming welfare benefits.

France to cut welfare spend by €9.5bn

France's Socialist government has detailed a €21bn cost-cutting plan, the biggest in the country's modern history, saying it will focus on trimming welfare benefits.

Presenting the 2015 budget, finance minister Michel Sapin said the measures show the government is serious about reining in its budget deficit, which is above European Union limits.

"These spending cuts are crucial to our credibility in the eyes of the French and Europeans. They'll be fully applied," he said.

Mr Sapin insisted, however, that they are not austerity measures as they will be accompanied by tax cuts as well.

The government hopes the reforms will assuage EU authorities irked by France's decision to let its budget deficit reach 4.4% of gross domestic product this year - far above the 3% demanded by the EU.

A significant part of the savings is to be made in France's welfare system. The government will cut social security spending by €9.5bn, including €3.2bn from health spending, and €700m from family benefits.

These measures prompted harsh criticism - especially among leftist voters - in a country that prizes its public services.

The government says it will reduce income taxes for six million families next year, for a total amount of €3.2bn.

The 2015 budget also plans to reduce the number of state employees next year and limit wage increases.

At the same time, the government vowed to reduce the tax burden on employers in the hope of encouraging hiring.

"In the context of low growth and low inflation ... the government is now forced to make spending cuts measures, instead of simply freeze the spending as it used to do," said Antoine Bozio, economist and director of the Institute of public policies.

France's debt is now above two trillion euro and represents 95.1% of gross domestic product, according to statistics released on Tuesday.

The 2015 budget must be approved in parliament in coming weeks.

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