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French government faces key test of economic reform plan

France's bid to embark on a programme of economic reform financed by big state spending cuts faced a parliamentary vote on Tuesday that was shaping up as a test of the Socialist government's credibility.

PARIS: France's bid to embark on a programme of economic reform financed by big state spending cuts faced a parliamentary vote Tuesday that was shaping up as a test of the Socialist government's credibility.

President Francois Hollande and Prime Minister Manuel Valls have made a business-friendly programme of reductions in payroll and income taxes the centrepiece of their plan to lift the country out of the economic mire.

But it is a strategy that has provoked deep misgivings within their own party, with lawmakers questioning both the morality and the economic logic of the proposals to cut 50 billion euros ($70 billion) from state spending over the next three years, partly through freezing a range of welfare benefits and the pay of most public sector workers.

Deputies in the lower house National Assembly were due to hold a consultative vote on the plans on Tuesday evening, which while not decisive was described by Valls as "a moment of truth".

"It will profoundly leave its mark on the evolution of our country," he told parliament.

There is speculation that a significant number of Socialists could abstain on the vote, which would leave the government in the embarrassing position of having to rely on support from opponents on the right to secure parliament's endorsement for the centrepiece of its economic plans.

Valls, who unveiled a series of concessions on the spending cuts on Monday in a bid to appease the left of the party, told a meeting of the Socialist parliamentary group that Tuesday's debate amounted to a vote of confidence in the government.

Yann Galut, one of the Socialist deputies who had threatened to abstain, said on Twitter that he had been won over by the premier's address and concessions which will notably ensure some five million pensioners are no longer affected by the welfare freeze.

But leading rebel Christian Paul said he had not changed his position and predicted that "several dozen" of his colleagues would also abstain.

"It is not about defying the government, it is about sending an alert about the need for a reorientation of policy," Paul said.

Twelve of the 17 Green deputies in the Assembly also indicated that they would abstain or oppose the government's so-called Stability Programme. The Greens were part of the government until recently but elected to leave it after Hollande appointed Valls to head it at the end of March.

Often compared to former British premier Tony Blair, Valls is a controversial figure within the Socialist Party -- his hardline stances on immigration and crime led to frequent clashes with fellow ministers during his time as interior minister.

But he is close to Hollande and the president has given him unequivocal backing over a cuts package which aims to ensure France brings its budget deficit into line with European Union rules while freeing up funds for the planned tax and payroll cuts.

The strategy reflects a widely held perception that France's corporate sector has become uncompetitive and that the heavy tax burden on employers is acting as a brake on job creation.

This is making it much harder for the economy to gain any momentum as it struggles to emerge from years of recession and stagnation which has left the country with record unemployment.

Valls's most important concession to the rebels in his party was a pledge that the welfare freeze would not be applied to pensioners living on less than 1,200 euros a month -- a measure which will cost an estimated 300 million euros to deliver.

He also agreed to resume inflation-linked pay rises for the lowest-paid public sector workers and said he would proceed with a revaluation of the minimum level of state income support for the long-term unemployed from this year, rather than delaying it until 2015.

The premier has however insisted on maintaining the overall target of 50 billion euros in cuts between 2015 and 2017, so the cost of the concessions will have to be recovered elsewhere.

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