French PM says firms shirking hiring pledges under tax break scheme

PARIS (Reuters) - French Prime Minister Manuel Valls accused companies on Monday of failing to live up to hiring promises under a tax break at the heart of a government push to restore competitiveness.

President Francois Hollande's government offered companies 40 billion euros (30.87 billion pounds) in payroll tax credits in 2014 to help reduce labour costs blamed for making French companies uncompetitive.

The shift to a more business-friendly stance was intended to bring down stubbornly high unemployment with employers pledging to ramp up hiring in exchange.

With little evidence of a hiring spree and unemployment stuck at 10.6 percent, Valls said the results so far were "unsatisfactory" and promises had not been kept.

"We will respect our financial commitments, but the aid can be made conditional or shifted," Valls said after a meeting with employers' representatives and trade unions.

"This isn't a threat, but everyone has to live up to their responsibility," he added.

The Socialist government has been under pressure from left-wingers, including on its own benches, to scale back the tax break, which they say is too generous to companies that fail to live up to their side of the bargain.

The government decided last month to transform the credits into a permanent cut in companies' payroll tax.

While the tax credit scheme has so far failed to create many jobs, it has helped companies' competitiveness, restoring corporate profit margins that were among the lowest in Europe, according to the INSEE national statistics office.

French firms' share of euro zone exports to the rest of the world has stopped falling since the tax credit scheme was put in place, stabilising at 12 percent, according to Reuters calculations.

For a graph on French companies' share of euro zone exports, click on: http://link.reuters.com/hek46s

(Reporting by Myriam Rivet, writing by Leigh Thomas; editing by Michel Rose and Paul Taylor)