President Nicolas Sarkozy unveiled plans Friday to slash billions of euros of public spending in a bid to start reining in France's chronic deficits as the country prepares to assume the European Union presidency. Sarkozy rejected opposition claims his right-wing government was planning “austerity” measures that would hit the poor hardest, insisting savings would come from reforming the civil and diplomatic services and rooting out waste. “This is not a question of left or right,” the president said after chairing a council on public policy reform at the finance ministry. “The time for reform of the state has come ... Savings alone do not amount to reform, but reform will lead to savings. That is the difference between austerity and reform,” Sarkozy argued. Finance ministry figures predict the 166-point cost-cutting plan will generate seven billion euros (11 billion euros) in savings by 2011. France is facing mounting pressure from its European partners to slash its total public deficit - which stood at 1.2 trillion euros at end 2007 - as it prepares to take over the six-month presidency of the European Union in July. The savings would represent a small first step towards balancing the French budget, which Paris has pledged to do by 2012 - two years later than the eurozone target of 2010. But the Socialist opposition accuses the government of bringing in painful austerity measures after devoting 13.6 billion euros last year to a tax package it says benefited the middle and upper classes. “Everyone knows this is a creeping form of austerity,” said the Socialist deputy Jean-Christophe Cambadelis, who said the measures “affect every aspect of French people's everyday lives.” France's biggest union, the CGT, accused the government of “amputating seven billion euros of means from essential sectors,” calling it “a real step backwards.” But Sarkozy insisted the 2012 budget target was “within reach without jeopardising the quality and efficiency of our public policies.” Much of the savings would come from attrition in the civil service, under a policy launched last year to replace only one in two retiring workers - with half of the savings used to raise low public sector wages. “The balance of our public finances, today and tomorrow, depends on our ability to reduce staff numbers,” Sarkozy said. Civil servants who choose to retire in France's overseas territories - including tourist hotspots Tahiti and Reunion - would lose generous pension bonuses that cost the state some 250 million euros per year. Cuts are also planned in defence and diplomatic spending, by pooling administrative services for the air force, army and navy, and scaling back France's diplomatic corps, the world's second biggest after the United States, in around 30 countries. Social spending cuts would include a tightening of the rules on access to public housing - for which 70 percent of the population is currently eligible - and a drive to combat welfare fraud. On the economic front, the state would limit business innovation subsidies to firms of fewer than 5,000 employees and restrict the use of state-subsidised work contracts to the long-term unemployed. Friday's Council on the Modernisation of Public Policies was the second since Sarkozy's election last May. The first in December led to 96 cost-cutting measures. A third is planned in May. Under European fiscal rules, member-states are committed to keeping their annual budget deficits under 3.0 percent of Gross Domestic Product. At the same time, their accumulated past deficits should not amount to more than 60 percent of total annual economic output. The French budget adopted last December shied away from deep cuts, despite warnings that the state was bankrupt, with the total public deficit projected to reach 64 percent of GDP in 2008. France late last month revised upwards its forecast for the state's public deficit this year to 2.5 percent of GDP. __
