French PM vows 'new chapter' as he slashes labour costs, taxes

French PM vows 'new chapter' as he slashes labour costs, taxes

France's new prime minister vowed Tuesday to "open a new chapter" for the country by slashing labour costs and taxes to turn around the struggling economy, in a passionate maiden speech.

France's newly appointed Prime minister Manuel Valls (C) is applauded by MPs after the vote of confidence following his domestic policy speech, on April 8, 2014 at the French national assembly in Paris

Addressing parliament for the first time since he took over as premier last week following the ruling Socialists' dismal showing in local polls, Manuel Valls promised to bring back "confidence" with measures aimed at boosting growth and consumer spending power and creating sorely-needed jobs amid record unemployment.

"Too much suffering, not enough hope, that is the situation of France," the former interior minister said, kicking off a 47-minute speech to rowdy lawmakers who booed or applauded him at regular intervals.

Valls, who stands in the right wing of the Socialist party and whose style has drawn comparisons with Tony Blair, replaced Jean-Marc Ayrault last week at the demand of President Francois Hollande who also presided over a government reshuffle.

After the speech, Valls easily won a confidence vote in the National Assembly with 306 votes for and 239 against. There were 26 absentions.

- Companies crucial for economy -

In his speech, the 51-year-old announced France would slash labour costs by 30 billion ($41 billion) euros by 2016, by for instance abolishing payroll taxes paid by employers for minimum wage earners.

France's sky-high labour costs have long been blamed for deterring companies from investing in the country and Valls stressed that businesses were a crucial part of the economy.

"Supporting companies is supporting employment, investment and exports," he said.

Valls said his government aimed to cut the number of administrative regions in France by half, a politically difficult step that many observers had said would be an indication of the new government's commitment to make painful cuts.

He also promised to raise the spending power of the worst-off by reducing payroll charges for minimum wage earners and slashing other taxes, for a total value of 5 billion euros.

And in what should come as a relief to the European Union, he vowed to keep pushing for the "recovery" of the country's public finances, confirming 50 billion euros in budget cuts by 2017.

Valls said the cuts included 19 billion euros from state spending, 10 billion euros from health insurance and 10 billion euros from local governments. He did not specify where the rest of the savings would be found.

"Of course we must straighten up our public finances but not by destroying our social model or our public services," he said.

"I am for respecting our commitments, for budget responsibility, not for austerity," Valls added, though he made no mention of whether Paris would push for another extension to an EU deadline to reduce its public deficit, as the new government has hinted it may do.

He also slammed the high level of the euro, which he said was 10 percent higher than in the summer of 2012 and was eroding efforts to improve competitiveness and boost exports.

"I ask you, with my heart beating for France, to give me your trust," he asked lawmakers. "So that together, we give back this confidence to the French."

- 'Right direction' -

The speech drew tepid reactions from politicians but economist Pascal Perri welcomed the measures as striving to boost both businesses and consumer demand.

"It's an excellent idea to give back some spending power at a time when the domestic market forms the main pillar for growth in France," he said.

"I have the feeling that the French want someone with a real will, who expresses ideas of common sense as was the case today with Manuel Valls.

"Momentum is needed and what I heard today goes in the right direction."

In a further glimmer of hope for the country, official data released by the Bank of France Tuesday predicted growth for the first quarter of the year would be 0.2 percent -- higher than the figure of 0.1 percent expected by the INSEE statistics institute.

The Bank of France also announced that industrial output in most sectors firmed up in March, and the index of industrial business confidence edged up to 99 from 98 in February.

French joblessness has continued to climb despite a tepid recovery, however, hitting a record 3.34 million people in February.

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