French government faces 'moment of truth' on economic reform

French Prime Minister Manuel Valls moved today to head off a threatened revolt within the ruling Socialist Party by modifying a proposed cuts programme and demanding a looser eurozone monetary policy.
Valls, who is under pressure from fellow Socialists over plans to cut public spending by USD 69 billion over the next three years, outlined a number of adjustments which will soften their impact.
And in a move likely to play equally well with the left of his party, he took a swipe at the European Central Bank over the "too high" level of the euro, which he said was blocking economic recovery.

Backed by President Francois Hollande, Valls has proposed the cuts package to ensure France brings its budget deficit into line with EU rules while freeing up funds for reductions in income and payroll taxes designed to boost the sagging economy and generate jobs.
But aspects of the plan, particularly freezes on welfare benefits and public sector wages, have angered many within the ruling Socialist Party.
Some lawmakers have threatened to challenge Valls's authority by refusing to support the package in a non-binding vote in parliament tomorrow.
A decision by 40 Socialists to abstain would be sufficient to put the government in the embarrassing position of having to rely on opposition votes to carry the motion, but the signs were today that Valls had done enough to limit the rebellion to manageable proportions.