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FRANCE - ECONOMY

Social welfare needs funding reform, French PM says

Latest update : 10/07/2012

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Article text by News Wires

French Prime Minister Jean-Marc Ayrault said Tuesday on day two of a conference between government ministers, unions and business leaders that the country needed to be more creative in finding sources of funding for social welfare programmes.

AFP - France will make legislative changes next year to how it funds social programmes in a bid to lower labour costs and boost competitiveness, Prime Minister Jean-Marc Ayrault said on Tuesday.

Speaking at the end of a two-day conference gathering unions and employers, Ayrault said the country needed to reform its system of using payroll charges to fund social welfare programmes.

"The government will initiate a dialogue with its social partners, with the goal of legislative reform in 2013," Ayrault said.

"As regards the financing of our welfare system, prospects must quickly be found, as much to ensure the future of social welfare as to increase the competitiveness of our businesses," he said.

He said a number of options would be considered "to increase and diversify sources of funding" for social programmes.

France's trade deficit remains high and ministers in Socialist President Francois Hollande's new government have raised concerns that low competitiveness is stifling the economy and hampering job creation.

The government has scrapped a plan of former president Nicolas Sarkozy, who Hollande defeated in May, to lower employer social charges by compensating with an increase in the value-added tax.

It is said to instead be considering an increase in the CSG, a complimentary social tax that applies to other incomes including investments, rental revenues and capital gains.

Hollande opened the conference Monday urging unions and employers to adopt a culture of compromise to kickstart the country's stagnant economy, which is expected to contract in the second quarter.