France to reallocate 2 billion euros for job creation

A woman and her daughter arrive at a National Agency for Employment (Pole Emploi) centre in Nice September 26, 2012.

PARIS (Reuters) - France will reallocate 2 billion euros from its 2013 budget to help finance state-aided job creation, Budget Minister Jerome Cahuzac said on Sunday.

With the unemployment rate at a 15-year high and rising, President Francois Hollande has promised to turn things around this year and hopes that plans to create thousands of subsidised jobs and "generation contracts" to encourage companies to hire young workers kick in quickly.

Speaking on Europe 1 radio, Cahuzac said the government would need to raise its 6.5 billion euros budget reserve - usually used for unforeseen events such as natural disasters or military operations - as a precaution.

"At my request, the president and prime minister decided to increase this reserve by 2 billion euros because we think notably that for our job policy we'll need more money to finance state-aided jobs and generation contracts," Cahuzac said.

The minister said the funds would not come by increasing deficits or taxes but from existing budgets.

Hollande's administration is struggling to stop losses of industrial jobs while curbing public spending and raising taxes to help slash debt in a stagnant economy.

A survey by IFOP for weekly newspaper Le Journal du Dimanche on Sunday showed three-quarters of respondents did not believe Hollande would be able to keep his promises on jobs.

The president, who has decided to carry out at least one visit a week across France to explain his polices, is trying to win back voters who are increasingly unhappy over the government's handling of the economy and disillusioned by a series of communication gaffes.

The decision by France's Constitutional Court in December to strike down Hollande's symbolic campaign pledge to impose a 75 percent tax rate on income over 1 million euros was a political blow to the Socialist leader.

Cahuzac, who reiterated there would be no further tax hikes during Hollande's presidency, said the government would not abandon the tax on the super wealthy.

It would be amended it to ensure it meets constitutional requirements and included in the 2014 budget, he said.

Cahuzac said the rate could be reduced and may last beyond the two years originally planned for the 75 percent rate. (Reporting By John Irish and Sophie Louet; Editing by Angus MacSwan)