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France's new Socialist govt cuts members' salaries

Thursday - 5/17/2012, 2:23pm  ET

By SARAH DiLORENZO and SYLVIE CORBET
Associated Press

PARIS (AP) - French President Francois Hollande's new Socialist-led government adopted a 30 percent pay cut Thursday, a gesture of shared sacrifice by leaders who must now reduce the country's massive debts and tackle spiraling unemployment.

The new Cabinet's first meeting, just a week after conservative former leader Nicolas Sarkozy last convened his government, marked a sharp shift in France's power structure and strategy for solving Europe's debt crisis and managing the economy.

The new finance minister reduced hopes in some other European capitals that Hollande would drop his demand for a renegotiation of a hard-won European treaty on trimming budgets.

"The treaty will not be ratified as is. It must be added to, completed with a growth amendment," Pierre Moscovici said after taking control of the Finance Ministry.

Hollande, elected May 6, has said the treaty focuses too much on spending cuts that are stifling growth and making the debt crisis worse, and argued for stimulus spending as well.

He and the leaders of Germany, Britain, Italy and the European Union held a conference call Thursday to discuss Europe's economic strategy ahead of the Group of Eight summit in the United States. Hollande leaves Thursday night for Washington for a meeting with President Barack Obama, and then attends the G-8 and NATO summits.

Hollande promised during his campaign to protect France's elaborate social benefit system _ even vowing to roll back some of Sarkozy's cuts _ while also continuing to trim the country's deficit. France hasn't balanced a budget in nearly 40 years, and Hollande has promised to eliminate the deficit in 2017.

It will be a difficult balancing act for the Socialists, who are taking power in the middle of a global economic slowdown and Europe's debt crisis. France's GDP did not grow in the first quarter of the year. Economists say growth will require deep reform to France's inflexible labor market _ and it's unclear if Hollande is willing to take that on.

"A country that is indebted is a country that grows poorer," Moscovici said on BFM television on Thursday. "But responsibility and growth are not mutually exclusive."

Ministers leaving the Cabinet meeting said the government started by adopting a 30 percent pay cut, making their gross, pre-tax salaries (EURO)9,940 ($12,605) a month instead of (EURO)14,200 ($18,008). The president and prime minister pledged to do the same, but that has to be confirmed in a formal law, government spokeswoman Najat Vallaud-Belkacem said. The president's salary will shrink from (EURO)21,300 ($27,012) to (EURO)14,910 ($18,908) a month before taxes and social charges.

The ministers also signed an ethics charter unprecedented for a French government, pledging to spend less money to lead their ministries, take trains instead of planes on medium-range travel, avoid any conflict of interest and be transparent about government actions.

Half of the 34 members of government are women. It includes Socialist heavyweights with government experience as well as many new faces. One, Fleur Pellerin, junior minister for small business, admitted afterward that the meeting was a bit "intimidating" for newcomers.

As a series of handovers of power took place Thursday, the emphasis seemed to be more on enhancing or at least protecting benefits than on cutting spending.

Employment Minister Michel Sapin said his major challenge would be reducing unemployment that has reached 10 percent and allowing people who started working at a young age to retire earlier than a law passed under Sarkozy currently allows them to. Sarkozy faced down unions and strikes to push the retirement age to 62 from 60, saying it was the only way to save the system.

"We need to as quickly as possible put an end to the flagrant injustice put in place by the previous government," said Sapin. "What's on the agenda is to ensure the sustainability of our social benefit system that will allow retirees to live."

The new government will also confront major international questions, like Hollande's promise to withdraw troops by the end of the year from Afghanistan.

Defense Minister Jean-Yves Le Drian, an old friend of Hollande's, and Foreign Minister Laurent Fabius, a former prime minister, will surely wade into that debate, which will be raised at a NATO summit this weekend in Chicago.

Many NATO partners are unhappy with Hollande's decision. France had previously committed to keeping troops in the country until 2013 _ already faster than the alliance's timetable.

___

Cecile Brisson and Samantha Bordes in Paris contributed to this report.


(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)