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Oct 1, 7:51 AM EDT

France's Socialists take axe to welfare spending with planned cuts in 2015 budget


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PARIS (AP) -- France's Socialist government has detailed a 21 billion-euro ($26.5 billion) cost-cutting plan, the biggest in the country's modern history, saying it will focus on trimming welfare benefits.

Presenting the 2015 budget on Wednesday, Finance Minister Michel Sapin said the measures show the government is serious about reining in its budget deficit, which is above European Union limits.

"These spending cuts are crucial to our credibility in the eyes of the French and Europeans. They'll be fully applied," he said.

Sapin insisted, however, that they are not austerity measures as they will be accompanied by tax cuts as well.

The government hopes the reforms will assuage EU authorities irked by France's decision to let its budget deficit reach 4.4 percent of gross domestic product this year -far above the 3 percent demanded by the EU.

A significant part of the savings is to be made in France's generous welfare system. The government will cut social security spending by 9.5 billion euros, including 3.2 billion euros from health spending, and 700 million euros from family benefits.

These measures prompted harsh criticism - especially among leftist voters - in a country that prizes its public services.

The government says it will reduce income taxes for 6 million families next year, for a total amount of 3.2 billion euros.

The 2015 budget also plans to diminish the number of state employees next year and limit wage increases.

At the same time, the government vows to reduce tax burden on employers in hopes of encouraging hiring.

"In the context of low growth and low inflation... the government is now forced to make spending cuts measures, instead of simply freeze the spending as it used to do," said Antoine Bozio, economist and director of the Institute of public policies.

France's debt is now above two trillion euros and represents 95.1 percent of gross domestic product, according to statistics released Tuesday.

The 2015 budget must be approved in parliament in coming weeks.

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