Crunch time for new French PM as he makes first policy speech

Crunch time for new French PM as he makes first policy speech

PARIS - France's new Prime Minister Manuel Valls faces his first major challenge on Tuesday as he makes a highly-anticipated speech in parliament that will determine the future direction of the struggling country, followed by a vote of confidence.

Mr Valls, appointed by President Francois Hollande last week after the ruling Socialists suffered a drubbing at local elections, has been tasked with boosting growth, creating sorely-needed jobs, cutting payroll taxes and slashing 50 billion euros (S$86 billion) from public spending.

His speech at 1300 GMT (9pm Singapore time), which is expected to lay out exactly how his reshuffled, streamlined government intends to face the challenge, comes as official data published early on 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 per cent - higher than the figure of 0.1 per cent expected by the INSEE statistics institute.

Official figures also showed an improvement in the trade deficit in February in a tentative sign that the clouds over the French economy are thinning.

Mr Hollande has tasked Mr Valls with implementing a package of pro-business policies known as the Responsibility Pact, which cuts taxes on firms that are widely viewed as hampering employment and growth, to be financed by 50-billion-euro spending cuts.

His speech is expected to detail where those cuts will come from.

Mr Hollande also asked his new prime minister to set in motion a new "Solidarity Pact" that would include steps to boost people's spending power.

Mr Valls's new government has also sent strong signals that it will try to obtain an extension of European Union deadlines for reducing the public deficit to 3.0 per cent of output, a deadline which was already recently extended by two years to the end of 2015.

The new prime minister, who replaced Jean-Marc Ayrault following disastrous results at municipal elections, has been preparing the speech for several days and said on Tuesday morning that his message would be about "building trust."

After his speech to parliament, lawmakers will stage a confidence vote, which could potentially derail the new government if a majority votes against Valls.

But while the left-wing of the Socialist Party and the Greens do not approve of Valls, a former interior minister considered to the right of the party, he is nevertheless expected to sail through with a comfortable majority.

The government is counting on growth to reduce the political and social fallouts from enacting cutbacks, and other data published on Tuesday reflected to varying degrees an underlying improvement in the state of the economy.

The Bank of France said 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.

Customs data on Tuesday also showed that in February the monthly trade deficit fell to 3.4 billion euros from 5.6 billion euros in January.

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