France's Sarkozy eyes welfare rethink, fraud clampdown

BORDEAUX, France Tue Nov 15, 2011 1:07pm EST

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BORDEAUX, France (Reuters) - President Nicolas Sarkozy branded welfare fraud a "betrayal" of national principles on Tuesday and said France needed to rethink the way its benefit system was financed in order to ease the burden on employers.

The financing of the welfare system, one of the world's most generous, has become a hot issue ahead of a presidential election next April due to worries about the health of public finances and a parliamentary report pointing to billions of euros being lost every year because of fraud.

"We must have no tolerance for cheaters and fraudsters," Sarkozy told supporters in the southeastern city of Bordeaux. "Cheating -- and I mean stealing from the social security system -- is stealing from each and every one of us, and each and every one of you."

The president's comments came as France faced heavy pressure from global markets, a reflection of the fear the economy could be sucked into a spiraling debt crisis.

Sarkozy said fraud was "the most terrible and insidious betrayal of the spirit of 1945," referring to the patriotic ethos of the French resistance movement against Nazi occupation.

The parliamentary report, published earlier this year, estimated the French state loses 20 billion euros ($27 billion)per year to welfare fraud, much of it due to employers failing to pay social fees for their workers.

Announcing the creation of a "high commission" on the financing of welfare, Sarkozy said France's current system of levying social fees on salaries -- as opposed to taxes on consumption, for example -- was dragging on France's economy.

"We need to have a calm debate," he added.

A long-running discussion in France on shifting part of the burden for social fees onto consumers -- through a so-called social value-added tax -- did not given rise to any plans for reform in the 2012 budget cycle.

But Finance Minister Francois Baroin has hinted that debate on the "social VAT" may come back to the fore ahead of the presidential election in 2012.

While Sarkozy's conservative government has announced measures to tighten surveillance of fraud, including the creation of a national register of welfare beneficiaries, many people who are tasked with applying penalties say they are rarely enforced in practice.

The government, which hopes to keep supporters from defecting to the far-right National Front will hold a public debate on the welfare question by year-end, Sarkozy added.

France, under pressure from markets to trim its budget deficit, has unveiled two rounds of belt-tightening in the past three months but so far avoided cutting into public spending or making significant cuts to benefits.

A Harris Interactive poll on Tuesday showed that nearly two thirds of the French were willing to cut back on household spending. But a similar proportion said they objected to any reduction in public spending on schools, healthcare or pensions.

(Reporting By Yann Le Guernigou, additional reporting and writing by Nicholas Vinocur; editing by Matthew Jones)

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Comments (4)
JackWhite wrote:

We have a problem that is costing up $20B Euros a year.

Solution: Form a commission of course.

And when the commission provides the report, form a new commission to study the report. Once that is complete, a new commission will be formed to recommend actions based on the studies.

Nov 15, 2011 5:18pm EST  --  Report as abuse
Gearloose wrote:
The USA should do this before they ever look at federal pensions.

Nov 15, 2011 6:14pm EST  --  Report as abuse
GavinInTucson wrote:
Gearloose, we actually had that under welfare-reform which, sadly, was repealed under the 2009 Stimulus Bill.

Obama ensured the nation got back the fraud of Welfare For Life with no accountability in the system. This is a liberal’s idea of helping the little guy– by making them dependent on the government, disincentivizing (sp) them from actually looking for work and improving their situation.

Nov 15, 2011 9:33pm EST  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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