* France needs to trim 30 bln euros from deficit
* Tax rises on rich clear way for austerity drive
* Cuts contrast with drive for growth pledge
By Catherine Bremer and Daniel Flynn
PARIS, June 21 France's Socialists plan
unpopular welfare and civil service job cuts next year in an
effort to trim up to 30 billion euros from the deficit,
calculating that tax rises on the rich will convince the less
well off to accept their share of the pain.
President Francois Hollande won election last month
promising to rescue the nation's finances and persuade a
sceptical Germany that growth, not austerity, was the key to
reviving the troubled euro zone's economy.
Hollande considered delaying compliance with the European
Union's 3 percent deficit rule but is now resigned to meeting
the 2013 target, officials say, to avoid unsettling jittery debt
markets and alienating Berlin as he pushes for 120 billion euro
zone stimulus package.
For 2012, Hollande believes he can rely mainly on tax
increases to raise the 10 billion euros needed to cut the
deficit below a target of 4.5 percent of gross domestic product.
But to meet the much tougher ceiling next year, Hollande
will have to touch the sacred cow of state spending, the highest
level in Europe at around 56 percent of GDP.
Prime Minister Jean-Marc Ayrault will outline the
government's strategy to parliament on July 3 but advisors say
his deliberations are focused on cuts to the state health
insurance scheme, local government and all but the core
ministries of justice, education and the interior.
Citing a Budget Ministry source, Le Figaro newspaper
reported on Thursday that staffing in non-priority ministries
would be cut by 2.5 percent next year and running costs by 10
percent. The state could also slash subsidies in sectors like
agriculture and the arts, it reported.
Labour Minister Michel Sapin said staff cuts in some
ministries would be offset by hirings in priority areas such as
education - Hollande has pledged to hire 60,000 new teachers
over his five year term.
"There won't be a overall reduction in the number of civil
servants," Sapin told Europe 1 radio, saying the government
would disclose exact figures in the coming weeks.
A convincing win in Sunday's parliamentary elections gave
Hollande's Socialists a free hand to adjust the 2012 budget and
France's three-year spending plan over the coming weeks. The
government is widely expected to use an audit of the state's
finances in early July to justify spending cuts.
"Hollande's advantage is that he has the legitimacy to push
through a certain number of reforms," said economist Elie Cohen,
a member of an informal group that advises Hollande.
LEADING BY EXAMPLE
Since taking office in mid-May, Hollande has slashed his and
his ministers' salaries by 30 percent, shunned the presidential
jet in favour of the train where possible and remained in his
Paris apartment rather than moving into the Elysee Palace.
His more austere personal style - a sharp contrast with his
predecessor Nicolas Sarkozy, who was popularly perceived as a
defender of the rich - was symbolised by his promise to tax at
75 percent earnings of more than 1 million euros a year.
"He was smart to start by target ting the wealthy and by
having the government set the example. Now he is going to start
sounding some unpleasant truths and explaining that everybody
will need to make an effort," Cohen said.
Hollande's finance team says this year's budget targets can
be met without resorting to the sort of painful austerity cuts
seen in Greece or Spain.
Hollande plans for this year include an increase of
corporation tax for large companies, a surcharge on energy and
banking firms, higher inheritance and wealth taxes, and the
abolition of a tax exemption on overtime.
However, reducing France's deficit to 3 percent of GDP next
year would mean the spending cuts and the new tax regime would
have to generate 20-30 billion euros, depending on how much the
The current official growth target of 1.7 percent for next
year on which the previous government based its budget is
considered wildly optimistic by most economists.
"Avoiding a budget overshoot this year and coming up with a
budget that meets existing fiscal targets is crucial," said BNP
Paribas analyst Dominique Barbet. "We think it is doable. But
changes are needed and we expect some tough budgetary tweaking."
Hollande will need to persuade credit ratings agencies his
budget-pruning is credible. Moody's and Fitch have France on
negative outlook after Standard & Poor's made history by
removing its triple-A rating on Europe's No. 2 economy in