* Poll win boosts Hollande reform drive
* Socialist bloc wins 314 seats, conservatives routed
* Hollande wants European stimulus package of 120 bln euros
(Adds analyst, final seat count, details)
By Daniel Flynn and Jean-Baptiste Vey
PARIS, June 18 (Reuters) – A resounding Socialist victory in
weekend parliamentary elections will allow President Francois
Hollande to press ahead with reforms to tame France’s deficit
and promote economic growth in Europe, a senior minister said on
Monday.
Final results from Sunday’s ballot showed the Socialists and
their affiliates had won 314 seats, comfortably exceeding the
289 needed for a majority in the National Assembly and freeing
them from reliance on the anti-austerity and Eurosceptical far
left.
With the Senate upper house already controlled by the
centre-left, the Socialists are now turning their attention to a
special parliamentary session next month to push through budget
legislation, including tax rises for large firms, particularly
banks and energy companies.
The measures are part of Hollande’s dual drive to balance
France’s budget by 2017 while persuading Europe’s paymaster
Germany to back his call for a growth stimulus package of some
120 billion euros ($152 billion) for Europe.
Inheriting a stagnant economy and unemployment running at a
13-year high of 10 percent, Hollande faces a delicate balancing
act to prevent contagion from the deepening crisis in Spain and
Italy spreading to the euro zone’s second-largest economy.
Appearing to prepare the nation for possible tough measures,
Interior Minister Manuel Valls said the government would stick
to its pledge to cut the deficit while honouring promises to
raise spending on education and security.
With growth at a standstill and the European Commission
warning that France needs to trim spending to meet its 2013
deficit goal, analysts see some belt-tightening necessary. The
country has one of the highest levels of state spending in
Europe and posted a budget deficit of 5.2 percent of GDP last
year.
“We need to sort out this country: every Frenchman will need
to make an effort but fairly, via a tax reform. It will be
difficult but that is the task facing us,” Valls told RTL radio.
BNP Paribas economist Dominique Barbet said the Socialist
majority – which came as the pro-bailout New Democracy narrowly
won a Greek election – could allow France to implement
structural reforms and austerity measures which would otherwise
have been blocked by the far left.
The government has commissioned a thorough review of its
finances by the state auditor, which has repeatedly warned of
overspending in recent years. Many observers expect Hollande to
use this to water down his campaign spending promises.
A spokeswoman for the audit office said the report had been
postponed until July 2-4 from an initial release date of June 28
to fit with the agenda of Prime Minister Jean-Marc Ayrault, who
will detail government plans in a July 3 speech to parliament.
That allows the government to postpone a difficult
discussion of how it intends to compensate for the decrease in
tax revenues until after a June 28-29 EU summit where Hollande
will press leaders to back his growth pact for struggling euro
zone economies.
“COMPETITIVENESS DEFICIT”
Valls said that a resurgence by the extreme right – which
returned to parliament for the first time since the mid-1980s
with three seats – was due to widespread disenchantment with the
economic situation, which could be seen across Europe.
“We need to mobilise our European partners because piling
austerity on top of austerity will lead to tragedy and a deep
rift between Europeans and their politicians,” he said.
Hollande was expected to press the case for growth measures
at a summit of G20 leaders in Mexico on Monday.
He travels to Rome on Friday to meet Italian Prime Minister
Mario Monti, German Chancellor Angela Merkel and Spanish Prime
Minister Mariano Rajoy and discuss closer political union and
unified bank regulation in Europe, also on the EU summit agenda.
Amid rising tensions between Paris and Berlin, Merkel has
rebuffed Hollande’s calls for joint euro zone bonds to resolve
the crisis. She bluntly warned on Friday that France needed to
urgently look to its own flagging competitiveness.
“The question everyone is asking is what will France do in
terms of structural reforms and policies to stimulate growth
since there is a broad agreement that France has a serious
competitiveness deficit,” said Jean Pisani-Ferry, director of
the Bruegel think-tank in Brussels.
Government spokeswoman Najar Vallaud-Belkacem welcomed New
Democracy’s victory in Greece’s parliamentary election, which
relegated the anti-bailout SYRIZA party to second place and gave
some relief to financial markets on Monday.
“We are pleased that they have chosen the euro,” she said.
“We are ready to help them with this. President Hollande fought
to put growth back on the European agenda precisely to send a
positive signal to the Greeks.”
Ayrault is expected to name a permanent cabinet on Thursday,
with no major changes expected from the interim team in place
since mid-May, after top ministers won their parliament seats.
The conservative UMP party, whose weight in the National
Assembly has plunged by more than 100 seats to 194, seems
destined for a leadership battle after former leader Nicolas
Sarkzoy lost May’s presidential election.
($1 = 0.7921 euros)
(Additional reporting by Emmanuel Jarry; Editing by Alessandra
Rizzo)
