–Adds Details From Press Report, Accounting Court

PARIS (MNI) – France’s chronic deficit in the social security
sphere will be cut to E14 billion next year, a drop of 40% from the peak
in 2010, Budget Minister Valerie Pecresse said Thursday.

“For the health care sector, the deficit will be less than E6
billion, whereas we were at E12 billion in 2010,” the minister said in a
television interview.

Revenues will be boosted through the government’s strategy of
reducing tax write-offs and fiscal incentives, she explained.

On the spending side, savings of more than E600 million are
expected by reducing the prices of medication and by a “good-practice”
code for doctors, with bonuses for those who prescribe fewer and cheaper
drugs, Pecresse explained.

In addition, by gradually pushing back the age of retirement,
outlays of the public pension system will be contained, she said.

Citing more detailed figures from the social security budget to be
officially unveiled later today, the French business daily Les Echos
gave a deficit target of E13.9 billion for 2012, down from E18.2 billion
projected this year and E23.9 billion last year.

Much of the reduction is due to the recovery of the economy and the
labor market since the recession, as the bulk of social security
revenues come from payroll taxes.

But the government has also earmarked supplementary revenues and
widened the base of the CSG social tax on activity and investment
revenues to assure E6.5 billion in supplementary income, the newspaper
noted.

Much of the E12 billion austerity program launched last month
includes tax hikes — for example on tobacco, alcohol and soft drinks —
and lower tax write-offs, which will benefit the social system.

Nearly E20 billion in additional taxes have been created since 2007
to stem the rise in the social security shortfall, Les Echos estimated,
explaining that the strategy aims at limiting the tax burden on labor.

Less than half the rise in the deficit to a record high last year
can be attributed to the financial crisis, the president of the national
Accounting Court, Didier Migaud, declared in a parliamentary hearing on
Wednesday. He estimated the average structural deficit over the past
decade at 0.6% of GDP.

The accumulated debt of the social security system amounted to E136
billion at the end of last year, of which over a third is shouldered by
the treasury of the Accoss, which manages its accounts, and the rest by
the CADES, which finances its previous debt load over the longer term,
he said.

“Our social protection is extremely fragilized” by this debt
burden, Migaud warned the parliamentarians, arguing that there was no
justification for passing on the costs of today’s social care to future
generations.

While the social security shortfall is only a fraction of the
overall public deficit, which amounted to 7.1% of GDP last year, it is
particularly difficult to contain, given the rising outlays linked to
the aging population and burgeoning health care costs.

Many leaders of the political opposition argue for a hike in the
broad-based CSG social tax to a level comparable with income taxes to
finance higher social spending — a move the government has resisted,
preferring instead to reduce “fiscal niches.”

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

[TOPICS: MFFBU$,M$F$$$,M$X$$$,MGX$$$]