HIGHLIGHTS 1-France's Royal, Sarkozy go head to head in debate

PARIS (Reuters) - French right-winger Nicolas Sarkozy and his Socialist rival Segolene Royal went head-to-head on Wednesday in a live television debate that could decide Sunday's presidential election.

Below are highlights from the showdown, which began at 1900

GMT:

* TAX

ROYAL: "I want to raise small pensions straight away."

SARKOZY: "How will you pay for it?"

ROYAL: "I will tell you. I will put extra funds in the pension funds reserve."

SARKOZY: "Very good, where do you get the money from?"

ROYAL: "From a tax on stock exchange revenues.

SARKOZY: "Of how much?"

ROYAL: "The social partners (unions and business leaders) will discuss it. But at least the principle is established."

SARKOZY: "How much will you put in the fund?"

ROYAL: "I'm just setting out the principle. I have a plan."

SARKOZY: "No, no, hang on, this is very interesting. This tax you are creating, for us -- when (Socialist prime minister) Lionel Jospin created this (pension reserve) fund, it was to have 120 billion euros. There are 36 billion in it, each year the state puts in 6 billion. Your tax, roughly, how much is it?

ROYAL: "My tax will be at the level necessary for social justice."

SARKOZY: "That's a stunning piece of detail. Can't you give us a figure?"

ROYAL: "No I can't."

SARKOZY: "I see"

ROYAL: "Why not, why can't I give you a figure?"

SARKOZY: "That's your right.

ROYAL: "Why can't I give you a figure? Because the resumption of growth will also create additional revenues."

SARKOZY: "So you are going to create a tax without telling the French people how much it's going to be, and how much you hope to gain from this tax? That's really going to be a great help to the balance of our pension funds."

...

SARKOZY:"We're the country in Europe with the highest taxes.

"The problem of France is that we're paying too much tax, that the charges are too high.

"What does that mean? What's the result of that? It's not a problem of liberalism. It's not a problem of ideology. As we are in an open world, if employment is taxed too highly, employment will go. If capital is taxed too highly, capital will go. If there is no more capital, no more work, there is no growth.

"If I am elected president, I want to implement a systematic evaluation of all public policies. You have talked about professional training. You are perfectly right. There are phenomenal productivity gains in this area."

ROYAL: "It's a shame that you haven't done all that in the past five years. On the evaluation of public policies, it's the parliament which normally has the means to do that.... For five years, you had all the powers.

"There's a credibility problem, when one could have done certain things over five years and have given a certain place to the opposition in the national assembly. Why didn't you do it? You are not credible in the conception of the impartial state.

"On tax, my priority will be a cut in taxes on ecology. I want a significant tax reform on all that has a relation to job creation in the environmental domain."

* EMPLOYMENT/35-HOUR WORKING WEEK

SARKOZY: "At root, she is stuck in a Socialist logic of sharing work. There is work time which is to be shared out in a cake and she says nobody will work more than 35 hours, that will force bosses to hire more people.

"There isn't a single country, Madame, not a single one, Socialist or not, that has followed the logic of sharing work time, which is a monumental error.

"The 35 hours have not created jobs and the 35 hours were responsible for something even more serious which is wage restraint, which means our wages are too low. That hurts French people's purchasing power, and lower purchasing power means less growth."

ROYAL: "If you think the 35 hours caused so much damage, why didn't you get rid of them?" ...

"The very precise response on the 35 hour (work week) is that on this subject, as on others, there will be negotiations between social partners, sector by sector.

"Either they will agree and there will be the 35 hour (week), or they don't agree and there won't be a generalization of the 35 hour (week) in the companies concerned."

* HEALTHCARE REFORM

SARKOZY: "You cannot redistribute (money) between local governments and the state, and you cannot redistribute between the state and health insurance."

ROYAL: "Yes I can. If you can't, how do you want to reach office? I will be able to."

* DEBT

SARKOZY: "On debt reduction you have suggested no ways to reduce it, which is your absolute right. Relaunching growth is even more interesting. You have suggested no way of relaunching growth.

"I have one -- because you are right, we have to relaunch growth -- the problem of France is that there is roughly one percent growth less than in the major democracies and major economies that are making progress in the world.

"Why? For one reason, Madame Royal, because we work less than the others. How do we get one percentage point more in growth? By respecting work, giving work its value, considering work, giving work it its worth."

ROYAL: "If growth is above 2.5 percent (per year), I fund my presidential pact (election program) ... and if there is more growth, I pledge that everything that is above 2.5 percent growth will be dedicated to debt repayment."

* CRIME

ROYAL: "In 2002, Mr. Sarkozy, you talked about zero tolerance. But today, you can see that the French are very worried about the rise in violence and aggression in French society. The number of violent acts at school has risen by 26 percent.

"I want to be the president who creates a France where aggression and violence is receding, a France that will win the battle against unemployment and an expensive life, and that will allow to make inequalities decrease."

SARKOZY: "Am I responsible for a part of the record of the government? Yes, Madame Royal. You spoke of violence. I am responsible. I was interior minister for four years. I found a catastrophic situation which, moreover, went a long way in explaining Madame Royal, the defeat of your friends in the government to which you belonged at the time.

"If in 2002 the French people voted for change, and didn't even qualify the prime minister that you supported for the second round, there must have been a reason for that. The reason, everyone has understood, was that violence and delinquency had exploded, and it was in those conditions that I was named interior minister."

* EDUCATION

ROYAL: Maybe if you had not eliminated so many jobs in the education sector, we would not have the closure of classes at the new school year and a rise in school failures."