Upbeat Sarkozy hails 'year of renewal' in annual address

REUTERS - Pension reform and cuts in state spending will be two of the main tasks facing the French government in 2010, President Nicolas Sarkozy said on Thursday.

In a televised New Year’s Eve address to the nation, Sarkozy said 2009 had been a tough year and warned of challenges ahead for 2010.

“My dear compatriots, even if our ordeals are not yet over, 2010 will be a year of renewal,” said Sarkozy, who is suffering the economic turbulence midway through his five-year mandate.

France’s state accounts have crumbled during the global downturn because of higher welfare spending and lower tax returns, and Sarkozy said he would reduce expenditure in 2010 to guarantee the health of future finances.

He also promised to pursue two politically sensitive reforms over the next 12 months—a planned shake up of the generous national pensions system and a review of how the state takes care of its growing army of elderly citizens.

“In 2010 we will need to ... consolidate our pensions system, whose future financing I have a duty to secure, and face the challenge of how to care for the elderly, which in the decades ahead will be one of the most painful problems faced by our families,” he said.

France’s social welfare budget in France, including pension and health spending, is expected to run up a 30 billion euro ($43 billion) deficit in 2009 against a 10 billion euro deficit in 2008, and is set to worsen still further in 2010.

The sharp deterioration of state accounts has pushed pension reform rapidly up the political agenda.

Earlier this year, the government indicated the issue could wait until after the next presidential election in 2012, but officials now say talks with unions and employers will start in mid-2010, with decisions expected by the end of the year.

Sarkozy also said his government would oversee a reform of France’s multi-layered regional administrations and promised to reduce unemployment, which is hovering just under 10 percent.

He also confirmed that he would revive his flagship carbon tax, which was shot down by the Constitutional Court this week just days before the new levies on coal, gas and oil use were due to come into force.

The Constitutional Court objected to the tax because it offered too many loopholes to big industrial polluters, going against the spirit of fostering equality amongst tax payers.

“The government will put forward a new proposal on Jan. 20 to encourage consumers to consume (energy) in a better fashion and encourage producers to produce clean (energy),” Sarkozy said.