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France faces 'moment of truth' on economic reform

French Prime Minister Manuel Valls announcing 50 "simplification measures" in Paris, 28 April 2014.
French Prime Minister Manuel Valls announcing 50 "simplification measures" in Paris, 28 April 2014. Reuters/Jacques Demarthon

France’s Parliament votes this Tuesday on a three-year, 50-billion-euro public spending cut package backed by Prime Minister Manuel Valls. In an effort to placate critics in his own Socialist party, Valls made some adjustments yesterday to the initial plan presented last week.

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“We have to stop living beyond our means” said Valls in a letter addressed to Socialist MPs yesterday.

He called today’s vote a “moment of truth” for France, which is under pressure to bring its budget deficit into line with EU rules and asked MPs to approve the package which includes freezes on welfare benefits and public sector wages.

Lawmakers frustrated that the cuts fall on the shoulders of the poor have threatened to withhold their vote but Valls appears to have calmed their fears by making a few concessions.

These include a pledge that the welfare freeze would not be applied to pensioners living on less than 1,200 euros a month.

He also agreed to cost-of-living pay raises for the lowest-paid public sector workers.

Valls acknowledged that the 50 billion euro cuts could have a dampening impact on France’s economic growth, but he argued that this could be offset "by a more active monetary policy” at the European level and a “more realistic exchange rate” for the Euro, which he said was “too high”.

After it is presented to parliament today, the program will be sent to Brussels for approval by the European Commission.

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