France's new prime minister vowed Tuesday to "open a new chapter" for the country by slashing labour costs and taxes in a bid to turn around the struggling economy, in a passionate maiden speech. 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 said the measures were aimed at boosting growth, competitiveness and consumer spending power.
"Too much suffering, not enough hope, that is the situation of France," he said, kicking off a speech that laid out measures aimed at fulfilling challenges set by President Francois Hollande when he appointed Valls and reshuffled the government last week. The 51-year-old, the former interior minister, said 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 creating jobs, and Valls stressed that businesses were a crucial part of the economy. "Supporting companies is supporting employment, investment and exports," he said. Valls also promised to raise the spending power of the worst-off by reducing income taxes for minimum wage earners and slashing other taxes for modest households, 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. "Efforts we are making to reduce our deficits, on our structural reforms, on the competitiveness of our companies, on labour costs, must not be swept aside by a too-high level of the euro," he said. His speech came as official data published earlier Tuesday provided a faint glimmer of hope for the country.
The Bank of France said 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. Official figures also showed an improvement in the trade deficit in February, when it fell to 3.4 billion euros from 5.6 billion euros in January. 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. Lawmakers are still set to stage a confidence vote later Tuesday. But while the left-wing of the Socialist Party and the Greens do not approve of Valls, considered to the right of the party, he is nevertheless expected to sail through with a comfortable majority.
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