Valls cuts €21bn from welfare bill
France's Prime Minister freezes public sector pay and takes axe to pensions, social care and health care bill
PRIME Minister Manuel Valls today revealed how €21bn will be cut from France’s pensions, social care and health care bill over the next three years.
The cuts form a large part of the savings demanded by the country’s so-called €50bn “Responsibility Pact”.
He said that the government plans to slice €10bn from the cost of health care and €11bn from pensions and social care by 2017 - but he vowed to maintain benefits for those with the lowest incomes, and said the minimum wage would not drop from its current €9.43/hr level.
Family benefits, however, will be frozen until October 2015. This measure alone is expected to save the government between €2bn and €4bn.
Meanwhile, central government will have its spending cut by €18bn, while local councils will face cuts of €10bn.
Mr Valls took the unusual step of addressing the press after the Wednesday meeting of the Council of Ministers, a job usually reserved for a government spokesman.
He risked the wrath of France’s 5.2 million public servants when he said that public sector pay would be frozen for another year and that government agencies would be streamlined.
Public sector pay has not increased since 2010, and despite an earlier warning from the leader of the CFDT union Laurent Berger, Mr Valls said: “I know what we owe to our employees, however the situation forces us: we confirm the freezing of the index.”
He warned that staffing reductions may be necessary, but said that police, justice and education would be spared from the reductions.
Mr Valls insisted: “These efforts will be fair because they will be collective … and equally shared.”
According to a study by the National Institute of Statistics and Economic Studies (INSEE) published today, public sector workers experienced a decline in their average net wage in 2012, taking account of inflation.
The plan also expects to make savings by lowering subsidies to local government. Mr Valls added that he intended local bureaucracy to become “simpler, easier, more effective and less costly”.
Public spending in France accounts for about 57% of the country’s gross domestic product, one of the highest levels in the world.