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* 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 amorning tending to baby quince and pear trees, the FrenchSenate's 78 gardeners are blissfully untouched by the economiccrisis gnawing at

Europe's core. They have jobs for life that pay 40 percent above theaverage French take-home salary and get "wet weather" bonuseswhen they work in drizzle, storms or snow.

Stalled growth in Europe's No. 2 economy has exposed thestrain on public finances from the benefits lavished on theseand other civil servants, and a growing chorus of opinion saysit 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 inthe private

sector and we basically can't be fired." Even more comfortable are the hundreds of administrativestaff inside who get bonuses if lawmaker debates run over intothe night -

regardless of whether they stayed late themselves. They all rank as "fonctionnaires", a status held by 5.3million state-employed teachers, medics, magistrates and clerksin a

labyrinthine French administration running from thepresident's office to the furthest-flung town hall. The system has cushioned the households of one in fiveFrench workers from an

economic crisis that has batteredindustry and bled private-sector jobs across most of Europe. But with a public debt of 90 percent of output and SocialistPresident Francois Hollande battling

to slash a 4.5 percentdeficit, the question is whether France can still afford it. France must tackle its debt mountain as part of efforts toend the three-year crisis over euro zone

sovereign debt that hasraised doubts over the survival of the currency. Hollande stuck to taxing the rich and a mere freeze onpublic spending in his first budget last month but investors

arelooking for much deeper cuts to the state system. "It's the reform we keep putting off," Gerard Dussillol, aninvestment 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 eurozone crisis we must attack public spending," he told Reuters. POLITICAL

MILLE-FEUILLE Public spending eats up 56.3 percent of France's economicoutput, second only to Denmark among developed nations and 10points above neighbouring Germany. Around 40 percent

of the billgoes on a fiercely cherished welfare system and the rest fundscentral and local government costs. The government is about to embark on thorny discussions withtrade unions and

employers on new ways of funding France'sgenerous welfare state, currently financed by labour chargeswhich companies say is damaging their competitiveness. But others say huge cuts

could be achieved by paring downthe vast mechanics of the public sector itself. Post-war France has built up a system of government withsuch a mind-boggling number of layers it is nicknamed

a"mille-feuille" - the name of a sweet cream slice made of layerupon layer of paper-thin puff pastry. Mainland France is marked into 22 regions subdivided into 96departments, then

into 3,883 cantons and finally 35,303communes, ranging from tiny hamlets to big cities and each withits own mayor and municipal council. The communes are then grouped into 2,581

"intercommunalstructures", adding another layer of bureaucracy to co-manageissues like water treatment, waste management and schools. Even more layers exist: regions are chopped

into "pays" -areas sharing common interests - and the tiniest communes havetheir services provided by 2,358 communal associations. The addition of several hundred thousand local

governmentjobs in the last 20 years has spurred a 25 percent rise in thenumber of fonctionnaires over a period when the population grewjust 15 percent. Inefficiencies and wastage in the

system were mercilesslyexposed in a tell-all-book in 2010 by a local council employeein the city of Bordeaux that sold 400,000 copies. In "Absolument debordee" ("Totally

Snowed Under"), pennedunder a false name, Aurelie Boullet describes overpaidofficials, sometimes hired via political friendships, whoshuffle 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 fakedoctors' 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 manystaff as ministers. "It's a minority abusing the

system. Mostpeople are frustrated and want to put their skills into action." THE 58,000-EURO-A-MINUTE SUMMIT The state's own audit office weighed in last month, rappingthe

government for splurging 50 billion euros ($65 billion) ayear outsourcing services to more than 1,200 external agencieswhose staff is growing at 6 percent a year. Left-wing lawmaker Rene

Dosiere, who has spent years poringover wasteful spending, calculates that 15 billion euros couldbe shaved off annually by cutting out overlapping layers oflocal government that have grown

up in recent years. Boullet says vast sums of money are splurged at the tens ofthousands of local government offices on champagne receptions,hiring superfluous employees or office

refurbishments. Dussillol believes a total 30 billion could be saved pruningagencies and local government, enough to cut 1.4 points off adeficit France must reduce to 3 percent of GDP by

end-2013. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Public spending breakdown: Spending versus euro zone: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Hollande has set a firm example of frugality after hispredecessor Nicolas Sarkozy splurged out on lavish gardenparties and a luxuriously refitted presidential jet. Sarkozy once held an EU

summit that worked out at 58,000euros a minute, due to his refurbishing of a Paris museumcomplex for the three-hour event, according to Dosiere. Under Hollande, ministerial salaries have

been cut and lowerhouse lawmakers will see a 10 percent reduction to a 6,412 euromonthly office allowance they get to spend as they please. But hitting fonctionnaires with cuts is risky.

Withunemployment at a 13-year-high above 10 percent and Hollande'sapproval ratings as low as 41 percent he could face streetprotests the moment he mentions the idea. Hollande

understands the merits of slimming down the localgovernment system, people close to him say, and his team isactively discussing how it could be done. Yet a concrete plan ismonths away and

may be limited in its goals. "We are taking a hard look at what we could do to save moneyin the public sector," said a government source. "It's notenough to prune

budgets. We need a big-picture approach." No one should expect drastic measures yet. The sourceacknowledged the goal of any overhaul would only be to bringdown public spending to

pre-crisis levels of 53 percent - stillwell above the developed-country average of 43 percent. Hollande has a rare window of power as the Socialistscurrently control most French regions. Yet

the fact manylawmakers are also mayors of communes - and thus enjoy thebenefits of both - could mean stiff opposition in parliament. Those raking up the leaves in the luxuriant

LuxembourgGardens, run by the Senate since 1958, doubt much can change. "France is too generous so people take it for granted," saidNatalie, 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 LeighThomas; editing by Mark John and Anna Willard)

(([email protected])(+33 1 4949 5242)(ReutersMessaging: [email protected])) Keywords: FRANCE LARGESSE/