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Valls under fire over France cuts programme, benefits freeze

French Prime Minister Manuel Valls delivers a speech after the weekly cabinet meeting at the Elysee Palace in Paris, April 16, 2014

France's new Prime Minister Manuel Valls came under fire Wednesday after unveiling a freeze in state benefits as part of a plan to cut state spending by 50 billion euros ($70 billion).

The Socialist government has pledged to make the savings between 2015-2017 to finance a package of payroll and income tax cuts designed to bolster demand, make companies more competitive and attract investment.

Known as the Responsibility Pact, the plan is the centrepiece of President Francois Hollande's strategy for reviving a flagging economy and cutting unemployment.

Hollande first outlined it in January, but the details unveiled Wednesday still shocked those in the ruling party who were dismayed by his appointment of the centrist Valls to run the government.

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Christian Paul, a lawmaker on the left of the party, said he and fellow Socialist deputies had been "floored" by the announcement of the benefits freeze and the extension of a ban on cost-of-living increases for public sector workers.

Valls, the most popular figure in the government, was installed as premier after the Socialists suffered stinging reverses in municipal elections last month.

More than 40 percent of the savings envisaged (21 billion euros) will come from cuts in social benefits and healthcare.

Another 18 billion is to be trimmed from government ministries and the remaining 11 billion will come from a rationalisation of local government, Valls said.

Benefits, including income support for the young and long-term unemployed, most state pensions and family allocations, will be frozen until October 2015.

A pay freeze for France's five million public sector workers has been in place since 2010. Its impact is offset by guaranteed increases many receive under length-of-service agreements.

- Revolt threatened -

President Hollande on Wednesday said his "road map" for the Valls government was "difficult, bitter, rough, but indispensable."

"I wanted to face reality," he added.

The measures are to be examined by the cabinet next week and presented to parliament on April 30.

Paul said he and some other Socialist deputies would be unable to support the government if the package was not amended.

"We were not elected to organise a reduction in the spending power of pensioners, civil servants and workers who depend on social benefits," the Socialist lawmaker added.

The Valls government comfortably won a vote of confidence after its appointment earlier this month. Grumbling within the Socialist ranks has steadily grown over recent weeks, suggesting the parliamentary vote could be tight, but analysts doubt the left would be prepared to effectively bring down the government over the issue.

Both the far left and the increasingly popular far right attacked the austerity measures as being driven by the European Union and the German-backed rules governing countries that are part of the eurozone.

"Valls is acting like Brussels' bailiff," said far left former presidential candidate Jean-Luc Melenchon.

Florian Philippot, vice-president of the far-right National Front (FN), added: "Millions of French people are going to suffer a collapse of their living standard because the government insists on obeying the EU on the euro."

Recent opinion polls have suggested the FN could top the polls in next month's elections to the European Parliament.

- 'Living beyond our means' -

Responding to his critics, Valls said France had to get its public finances under control if its generous system of social provision was to survive, regardless of its euro commitments.

Public spending currently accounts for 57 percent of GDP and the national debt has risen from 50 percent of annual output in 2002 to 93.5 percent by the end of last year.

"We cannot afford to live beyond our means," Valls said. "And we have to break with this logic of debt, which stealthily and progressively is tying our hands. We have to reclaim our sovereignty."

In comparison to the swingeing benefit cuts implemented in some European countries in recent years, the Valls proposals are modest.

No state benefits are being abolished or cut and with annual inflation currently running below one percent, the impact of the freeze will be limited.

Valls also said there would no be no reduction in the minimum wage, which some employers have called for, and confirmed that Hollande's election promises to create tens of thousands of new posts in education, the police and the prison service would be honoured.