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French Socialists Yield to Math on Pensions


Last week union leaders and the French government traded barbs in the run-up to a new report on the country’s chronically underfunded pension system. Now the report has been released and its proposals are likely to make waves. According to the WSJ, the study recommends raising the minimun number of years French workers must pay into the pension system before they can retire without penalty. It also contains hints that public employees would be hardest hit in any reform—they receive more generous pension packages than their private counterparts, and the government wants to bring them in line with private standards.

Unfortunately, a reform that implements these proposals still seems far off. With only one in four approving of Hollande’s policies to date, there’s not much chance he can summon enough political will to get this done. Given the severity of the French crisis, that’s bad news: 

Without revision, the retirement of waves of baby boomers, combined with the increase in life expectancy, will leave the pension fund with a €20 billion ($27 billion) deficit in 2020—about 1% of the country’s gross domestic product.

“We have a duty to tell the truth” to the French people, Prime Minister Jean-Marc Ayrault said after receiving a report he had commissioned on the subject. “We’ll need to make some efforts.”

Sooner or later, change is going to have to come to the French pension system. The only choice before pols right now is whether it will come now by their own effort or be forced on them by fiscal crisis. Not even the French can win the war on arithmetic.

[Image of Pension Savings Bowl Courtesy of Shutterstock]

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  • Pete

    “Not even the French can win the war on arithmetic.”

    What an odd thing to say. Since when within the past one hundred years or more have the french won an war.

    Oh, I forgot. Charles de Gaulle and his army liberated Paris n 1944. sure he did.

  • three_chord_sloth

    The pension mess both here, there and everywhere, will not be fixed until we acknowledge one simple truth — the one thing we all want from our pensions is the one thing we cannot truly have — and that one thing is a guarantee.

    We have been building our pension promises on an untruth; that our pensions should be based on what we earned and created during our working years. That was an illusion, sustainable only during an era of high growth; both economic and population-wise.

    In reality, our retirement comfort ought to be based not on what we made while we worked, but on the world we left behind for our children and grandchildren. If we leave them a world with plentiful opportunities and the wherewithal to grasp them, then our retirements are splendid; if we loot the place as we slip on out the door to “lock in” what we’ve “earned”, then we deserve penury.

    This is the basis of a worthwhile intergenerational compact; no looting allowed. And no can-kicking either.

    • Pete

      Very insightful analysis.

      Thank you.

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