Valls vows to preserve French social model before vote

PARIS (Reuters) - Prime Minister Manuel Valls vowed to preserve France's social model while pushing pro-business reforms ahead of a parliament confidence vote on Tuesday in which left-wingers have threatened to abstain in protest.

The centrist leader is tipped to win parliament backing for his new government, reshuffled after he and President Francois Hollande purged it of rebel ministers last month. But it remains to be seen if he will emerge with enough authority to revamp the euro zone's second largest economy and cut its public deficit.

In a carefully calibrated speech designed to placate his Socialist Party while pushing pro-business reforms that have earned comparisons to former British premier Tony Blair, Valls said his goal was to improve living standards for all French.

"Reform doesn't mean destroying our social model," Valls said of France's highly protective labour code and a welfare state and health service among the most comprehensive and expensive in the world.

"We must adapt and reinvent this model but it's not dead, it's not outdated," he added.

Valls reaffirmed plans to shave 50 billion euros (£39.8 billion) of public spending by 2017 and hand business over 40 billion euros in tax cuts. He called for France's rules on worker representation - which bosses say are a cost burden - to be revamped by year-end.

But he ruled out changes to France's 35-hour work week and cuts to the minimum wage, while promising new benefits to poor pensioners on less than 1,200 euros a month.

"We don't do austerity," he insisted, arguing he was not in favour of a lesser role for the state in the French economy but "a better state".

Valls stepped up French calls for a further depreciation of the euro against the dollar and made a pointed call to neighbour Germany - whose leader Angela Merkel he will meet in Berlin next week - to do more to stimulate growth in the euro zone.

"Agreement between our two countries is vital to relaunch growth and give back real ambition to the European project," he said, adding: "Germany must fully assume its responsibilities."

Socialist Party managers expect some 30 deputies to abstain in a vote whose result is due around 7:30 pm local time (1630 London time). That would allow Valls to win a majority in the 577-seat assembly with backing from centrist allies in other parties.

VALLS FOR 2017?

Earlier, Christian Paul, one of the rebel Socialist backbenchers, said he expected the number of abstentions to be "probably around 30, perhaps a bit more" and stressed the goal was not an attempt to unseat Valls and push for new elections.

"Our intention is not to quit the coalition," he said.

"I want new policies - with or without Manuel Valls ... We worked together for more than 10 years to come to power and every time we move away from the promises we made in 2012 I think we are getting ourselves lost," he told RTL radio.

The vote comes after France finally conceded last week that near-zero economic growth would prevent it bringing its public deficit below three percent of output next year, the second time Hollande has broken such a promise to EU partners.

Hollande -- his popularity ratings at record low levels for a modern-day French leader -- is due on Thursday to hold a marathon news conference outlining plans for the rest of his five-year mandate and swatting away calls for critics for him to resign.

Financial markets and EU capitals from Berlin to Rome will look closely for clues on how fast France will enact promised new reforms on its labour market and how credibly Hollande re-commits to lowering the public deficit from its current level above four percent.

German officials have in recent days insisted that euro zone economies can only unlock growth and hiring with a mix of fiscal rigour and sometimes painful reforms, while Valls' Italian counterpart Matteo Renzi backs France in its quest to seek more flexibility on budget targets.

Even if Tuesday's confidence vote is positive, the Hollande-Valls duo already have a tough task convincing left-wing allies to back the plans to cut public spending through to 2017 while handing business over 40 billion euros in tax cuts.

They also face street protests at upcoming reforms to de-regulate tightly protected professions including notaries, pharmacists and taxi-drivers and to ease rules on worker representation in companies which bosses say are a cost burden.

With Hollande's approval rating already down at 13 percent, the government had been banking on Valls' popularity and more dynamic image to carry through the reforms.

Yet a survey by pollster Ipsos in Le Point magazine on Monday showed even his popularity was being contaminated by the sense of disarray surrounding Hollande, with his rating falling four points to 30 percent and a full 63 percent saying they had an "unfavourable view" of what he has done so far.

Valls brushed off suggestions he would abandon ship before 2017 presidential elections in which he could run himself.

(Additional reporting by Nicholas Vinocur, Alexandria Sage, Leigh Thomas; Writing by Mark John; editing by Anna Willard)

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