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France Seeks 2 Billion Euro Savings in Benefits Reform

French tax form
Philippe Huguen | AFP| Getty Images
French tax form

President Francois Hollande's government aims to save up to 2 billion euros ($2.59 billion) annually from 2016 under a proposed reform of France's generous system of family benefits unveiled on Monday.

The changes will stop short of cutting allowances outright for high-earning families, as had been floated by some officials. Instead, the bulk of the savings will come from reducing the income tax exemptions that wealthy parents can claim according to the number of the children they have.

(Read More: EU Gives France Leeway as It Reprimands Belgium )

The proposed reform also includes some new spending, which means that the net saving will be 1.7 billion euros from 2016.

That saving will not go a long way towards reducing France's overall budget deficit, but the move sends a signal to France's European Union partners that it is prepared to make politically sensitive reforms, having been given two extra years to meet a budget deficit goal of 3 percent of output.

(Read More: French Charm Offensive: Too Little, Too Late?)

"It Is perfectly possible to reduce our deficit while preserving the core of our social model," Prime Minister Jean-Marc Ayrault told journalists as he presented the plan.

Conservatives, who view the reform as another attack on France's traditional family model, may fight it as they did Hollande's gay marriage law, which came into force in May. They had opposed the idea of making basic family allowances dependent on household income.

People on both the left and right take pride in a generous family welfare system credited with producing one of the highest birth rates in Europe and giving France an economic advantage over countries like Germany where women have fewer children.

(Read More: Bottle of Wine From French Palace Sells for $9,400)

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