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Macron to take aim at French social welfare spending in 2019

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By Reuters
Macron to take aim at French social welfare spending in 2019
FILE PHOTO: French Prime Minister Edouard Philippe leaves after the weekly cabinet meeting at the Elysee Palace in Paris, France, August 3, 2018. REUTERS/Benoit Tessier   -   Copyright  BENOIT TESSIER(Reuters)

PARIS (Reuters) – French President Emmanuel Macron’s government will tackle social spending in the next wave of its reforms, the prime minister said in an interview, even though France will face a weaker growth outlook in next year.

Prime Minister Edouard Philippe said in an interview in Le Journal du Dimanche on Sunday the government would press on with its reform drive in the face of record unpopularity after little more than a year in office.

Macron has so far largely turned a deaf ear to criticism of his reforms, with detractors dubbing him the president of the rich after cuts in capital income during his first year in office which he said encouraged investment.

His government has sold its pro-business reforms on promises they will boost growth and jobs, but Philippe said growth would be weaker than expected next year.

Philippe told Le Journal du Dimanche that the 2019 budget would be based on a growth forecast of 1.7 percent, instead of the 1.9 percent forecast in April.

The prime minister acknowledged that that was likely to weigh on the public budget deficit, which was already under pressure due to plans to make a payroll tax credit scheme permanent.

“But that does not prevent us from sticking to our commitments on reducing taxes while reining in public spending and debt,” he added.

The slower growth outlook raises the chances that when the government produces its 2019 budget at the end of September it may need to change its target for a public deficit of 2.3 percent of economic output.

The government has been under pressure from Brussels and the International Monetary Fund to detail plans to rein in public spending, which is among the highest in the world.

Philippe said that the government wanted to reduce spending in particular on what he described as ineffective policies like housing or subsidised jobs.

He said that housing allowances, family welfare benefits and pension payouts would increase only 0.3 percent in 2019 and 2020. That is far less than the 1.5 percent average inflation rate economists polled by Reuters expect next year and the 1.8 percent expected in 2020.

Meanwhile, the government would consider reducing unemployed people’s jobless benefits over time as part of a reform of unemployment insurance, Philippe said.

Criticisms of Macron’s aloof leadership style and a summer scandal over his top body guard beating May Day protesters helped push his approval ratings to a record low of only 34 percent in August, according to an Ifop poll for Le Journal du Dimanche.

Philippe responded to criticism saying that the government’s policies were designed to reward workers and discourage unmeasured increases in welfare handouts.

Philippe said that tax on overtime pay would be axed as of September 2019 on top plans do away with worker contributions jobless and health benefits and housing tax.

Meanwhile, he said that efforts to shrink France’s vast public sector would be maintained with plans to cut 4,500 state jobs in 2019 and more than 10,000 in 2020.

“This is going to be a real bloodbath for the state and the public services,” far-left leader Jean-Luc Melenchon told reporters, responding to Philippe’s comments.

(Reporting by Leigh Thomas. Editing by Jane Merriman)