French PM Valls sees off revolt to win confidence vote

By Emile Picy PARIS (Reuters) - French Prime Minister Manuel Valls headed off a backbench revolt against his government on Tuesday, winning a confidence vote after promising to preserve France's social model while pushing pro-business reforms intended to boost economic growth. The centrist leader had demanded the parliamentary vote in an attempt to end weeks of speculation about the stability of his reshuffled government, which he and President Francois Hollande purged of three rebel leftist ministers last month. The vote tally showed 269 deputies backed Valls with 244 against. As expected, 32 in his Socialist Party abstained in protest at plans to make 50 billion euros (£39.8 billion) of public spending cuts in the next three years while easing taxes for business. Opposition leaders pounced on the fact that the high number of abstentions meant Valls had failed to achieve an absolute majority of 289 votes in the 577-seat assembly, warning that he would struggle to win parliamentary backing for the planned reforms. "This is more than a warning ... his days are numbered," Christian Jacob, leader of the conservative UMP party in parliament, said directly after the vote. In a speech designed to placate his Socialist Party while pushing pro-business reforms that have earned comparisons with former British premier Tony Blair, Valls earlier told the assembly his goal was to improve life 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 that are 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 "We must adapt and reinvent this model but it's not dead, it's not outdated," he added. With Hollande's approval rating at just 13 percent due to public dismay about the weak economy and his messy private life, the government is banking on the more popular Valls to carry through the reforms. Yet a survey by pollster Ipsos in Le Point magazine on Monday showed his popularity was being contaminated by the sense of disarray surrounding Hollande. The premier's rating fell four points to 30 percent and 63 percent of respondents said they had an "unfavourable view" of what he has done so far. "WE DON'T DO AUSTERITY" Valls reaffirmed plans to shave 50 billion euros off public spending by 2017 and hand business over 40 billion in tax cuts. He called for France's rules on worker representation - which bosses say are a cost burden - to be revamped by the 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." Earlier, Christian Paul, one of the rebel Socialist backbenchers, said the goal was not an attempt to unseat Valls and push for new elections. "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. 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 European Union partners. Hollande, whose popularity ratings are at record low levels for a modern-day French leader, is due to outline on Thursday his plans for the rest of his five-year term. Financial markets and EU capitals from Berlin to Rome will watch for clues on how fast France will enact the promised reforms to its labour market and how credibly Hollande re-commits to lowering the public deficit from its current level above four percent. German officials have insisted in recent days that euro zone economies can unlock growth and hiring only with a mix of fiscal rigour and sometimes painful reforms, while Valls's Italian counterpart Matteo Renzi backs France in its quest to seek more flexibility on budget targets. Even after winning the confidence vote, the Hollande-Valls duo will have a tough task persuading left-wing allies to back their plans for cutting public spending until 2017 while handing business the 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. (Additional reporting by Nicholas Vinocur, Alexandria Sage, Leigh Thomas; Writing by Mark John; editing by Anna Willard and David Stamp)