INSIGHT-Growth crisis exposes burden of French largesse

* Civil service benefits straining public finances

* Economic crisis puts onus on Hollande to cut wastage

* Public sector cuts could trigger street protests

By Catherine Bremer

PARIS, Oct 9 (Reuters) - Savouring a long lunch after a morning tending to baby quince and pear trees, the French Senate's 78 gardeners are blissfully untouched by the economic crisis gnawing at Europe's core.

They have jobs for life that pay 40 percent above the average French take-home salary and get "wet weather" bonuses when they work in drizzle, storms or snow.

Stalled growth in Europe's No. 2 economy has exposed the strain on public finances from the benefits lavished on these and other civil servants, and a growing chorus of opinion says it is time they were radically pruned back.

"I won't lie, we do very well," said one of the gardeners, who gave her name only as Natalie. "We earn much more than in the private sector and we basically can't be fired."

Even more comfortable are the hundreds of administrative staff inside who get bonuses if lawmaker debates run over into the night - regardless of whether they stayed late themselves.

They all rank as "fonctionnaires", a status held by 5.3 million state-employed teachers, medics, magistrates and clerks in a labyrinthine French administration running from the president's office to the furthest-flung town hall.

The system has cushioned the households of one in five French workers from an economic crisis that has battered industry and bled private-sector jobs across most of Europe.

But with a public debt of 90 percent of output and Socialist President Francois Hollande battling to slash a 4.5 percent deficit, the question is whether France can still afford it.

France must tackle its debt mountain as part of efforts to end the three-year crisis over euro zone sovereign debt that has raised doubts over the survival of the currency.

Hollande stuck to taxing the rich and a mere freeze on public spending in his first budget last month but investors are looking for much deeper cuts to the state system.

"It's the reform we keep putting off," Gerard Dussillol, an investment adviser and author of a 2012 book, "La Crise, enfin" ("At Last, The Crisis").

"If we want to avoid becoming the next domino in the euro zone crisis we must attack public spending," he told Reuters.


Public spending eats up 56.3 percent of France's economic output, second only to Denmark among developed nations and 10 points above neighbouring Germany. Around 40 percent of the bill goes on a fiercely cherished welfare system and the rest funds central and local government costs.

The government is about to embark on thorny discussions with trade unions and employers on new ways of funding France's generous welfare state, currently financed by labour charges which companies say is damaging their competitiveness.

But others say huge cuts could be achieved by paring down the vast mechanics of the public sector itself.

Post-war France has built up a system of government with such a mind-boggling number of layers it is nicknamed a "mille-feuille" - the name of a sweet cream slice made of layer upon layer of paper-thin puff pastry.

Mainland France is marked into 22 regions subdivided into 96 departments, then into 3,883 cantons and finally 35,303 communes, ranging from tiny hamlets to big cities and each with its own mayor and municipal council.

The communes are then grouped into 2,581 "intercommunal structures", adding another layer of bureaucracy to co-manage issues like water treatment, waste management and schools.

Even more layers exist: regions are chopped into "pays" - areas sharing common interests - and the tiniest communes have their services provided by 2,358 communal associations.

The addition of several hundred thousand local government jobs in the last 20 years has spurred a 25 percent rise in the number of fonctionnaires over a period when the population grew just 15 percent.

Inefficiencies and wastage in the system were mercilessly exposed in a tell-all-book in 2010 by a local council employee in the city of Bordeaux that sold 400,000 copies.

In "Absolument debordee" ("Totally Snowed Under"), penned under a false name, Aurelie Boullet describes overpaid officials, sometimes hired via political friendships, who shuffle papers all day and slack off in pointless meetings.

Now 33 and reinstated in a different Bordeaux office, Boullet says she has seen people skipping work by using fake doctors' notes or by having colleagues clock in their badges.

"The system is absurd. It needs a proper reorganisation," Boullet told Reuters, noting some mayors have twice as many staff as ministers. "It's a minority abusing the system. Most people are frustrated and want to put their skills into action."


The state's own audit office weighed in last month, rapping the government for splurging 50 billion euros ($65 billion) a year outsourcing services to more than 1,200 external agencies whose staff is growing at 6 percent a year.

Left-wing lawmaker Rene Dosiere, who has spent years poring over wasteful spending, calculates that 15 billion euros could be shaved off annually by cutting out overlapping layers of local government that have grown up in recent years.

Boullet says vast sums of money are splurged at the tens of thousands of local government offices on champagne receptions, hiring superfluous employees or office refurbishments.

Dussillol believes a total 30 billion could be saved pruning agencies and local government, enough to cut 1.4 points off a deficit France must reduce to 3 percent of GDP by end-2013.

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Hollande has set a firm example of frugality after his predecessor Nicolas Sarkozy splurged out on lavish garden parties and a luxuriously refitted presidential jet.

Sarkozy once held an EU summit that worked out at 58,000 euros a minute, due to his refurbishing of a Paris museum complex for the three-hour event, according to Dosiere.

Under Hollande, ministerial salaries have been cut and lower house lawmakers will see a 10 percent reduction to a 6,412 euro monthly office allowance they get to spend as they please.

But hitting fonctionnaires with cuts is risky. With unemployment at a 13-year-high above 10 percent and Hollande's approval ratings as low as 41 percent he could face street protests the moment he mentions the idea.

Hollande understands the merits of slimming down the local government system, people close to him say, and his team is actively discussing how it could be done. Yet a concrete plan is months away and may be limited in its goals.

"We are taking a hard look at what we could do to save money in the public sector," said a government source. "It's not enough to prune budgets. We need a big-picture approach."

No one should expect drastic measures yet. The source acknowledged the goal of any overhaul would only be to bring down public spending to pre-crisis levels of 53 percent - still well above the developed-country average of 43 percent.

Hollande has a rare window of power as the Socialists currently control most French regions. Yet the fact many lawmakers are also mayors of communes - and thus enjoy the benefits of both - could mean stiff opposition in parliament.

Those raking up the leaves in the luxuriant Luxembourg Gardens, run by the Senate since 1958, doubt much can change.

"France is too generous so people take it for granted," said Natalie, 39, who has been in the job since she was 18.

"I don't see how Hollande can change that." ($1 = 0.7689 euros)

(Additional reporting by Emile Picy, Brian Love and Leigh Thomas; editing by Mark John and Anna Willard)

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