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Pension Showdown: French Edition


French President Francois Hollande is dealing with a pension system €14 billion in debt and a political base that is unwilling to do what it takes to stop the bleeding. Keen to avoid the union-mobilized protests that brought hundreds of thousands of people to the streets when Nicolas Sarkozy raised the retirement age from 60 to 62, Hollande believes he has found a politically safe plan to reform the pension system: keep the retirement age at 60 but extend the contributions period required to receive a full pension. Reuters reports:

Reforms put in place under former President Nicolas Sarkozy to raise the retirement age and increase pension contributions were supposed to put the program in shape by 2020, but they have been counteracted by a sputtering European economy and years of slow growth. Now French pensions are in worse shape than ever. […]

Hollande wants any reform to have as wide a backing as possible. He angrily told the European Commission it could not “dictate” French policy after the EU executive urged it to take measures to reform its pension system by the end of 2013 and warned against increasing employers’ social contributions.

Labour Minister Michel Sapin on Monday ruled out extending the official retirement age past 62. However, he told BFM radio that increasing the number of years people must actually contribute for a full pension was “a good hypothesis”.

Hollande finds himself in the unenviable position of having to deliver left-leaning, “pro-worker” policies to his supporters while keeping investors and international creditors from pulling funds from France or downgrading its credit. This time last year, Hollande won the election largely by running as the anti-Sarkozy. But after a dismal first year, he finds himself facing the same fiscal challenges as his predecessor and proposing a remarkably similar solution. Keeping the retirement age at 60 while extending the required contribution period is essentially a Sarkozy-like reform policy under a more palatable guise. If he can get people to swallow it, it may give him the out he needs to improve the pension system, but it’s difficult to see how he can convince his base to ignore his flagrant disregard for his campaign promises.

So far Hollande has managed to be clever enough on pension reform to keep all the sharks at bay. But a significant showdown awaits. As the leader of one of France’s largest unions said, “The pension issue will be the one that will cause the biggest grief over the next six months and create a lot of tension with the government—that’s unavoidable.” Already besieged on his right, Hollande will now have to prepare for trouble on his left.

[Image of retired man in France courtesy of Shutterstock]

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  • Pete

    Like everyone else in the world, Hollande is merely kicking the can down the road.

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