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France Shuffles Toward Pension Reform


France’s socialists took their first real step toward reforming the country’s pension system yesterday. After months of pressure from EU leaders to shore up the finances of the struggling pension system, the lower house of the French Parliament narrowly passed President Hollande’s reform, which increases the amount that public employees contribute to their pensions without raising the retirement age. The measure still needs to pass the Parliament’s upper house before becoming law, but it is likely to cruise through without any significant changes.

This is clearly a step in the right direction, but many worry that it won’t be nearly enough. Business groups have been skeptical of the bill’s narrow scope from the beginning, and now Reuters reports that the EU is also concerned that much more will be needed. But amid the doubts, there is one promising sign of good things to come: the bill’s passage hasn’t drawn much of a reaction from the country’s strike-prone residents:

Hollande took a careful approach to the reform, opting to adapt the current system by raising the level and duration of pension contributions rather than attempt a politically risky increase in the current statutory retirement age of 60.

His softly-softly approach has staved off a repeat of huge street protests against earlier reforms by his centre-right predecessor Nicolas Sarkozy in 2010. Rallies on Tuesday gathered only hundreds in major cities – an even smaller turnout than for a previous round of protests on September 10.

Late in his Presidency, Sarkozy passed a reform that raised the retirement age by two years, but it was greeted by massive protests and was a key reason for his defeat—Hollande made the repeal of Sarkozy’s changes a cornerstone of his platform. Hollande’s reforms are more modest, but it looks like his will actually stick. The question now is whether he decides that he’s had his fill of reform or sees this as a starting point for further changes.

[François Hollande photo courtesy of Wikimedia Commons]

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  • Pete

    “Hollande’s reforms are more modest, but it looks like his will actually stick.”

    Sure. You make the ‘reforms’ meaningless enough and who will bother to resist?

  • crabtown

    Zero Hedge had an interesting post recently, so take it for what it’s worth, which could be nothing:

    Guest Post: They’re Coming For Your Savings

    Now for the big one, reported by Automatic Earth on Saturday October 12:

    The IMF Proposes A 10% Supertax On All Eurozone Household
    This is a story that should raise an eyebrow or two on
    every single face in Europe, and beyond. I saw the first bits of it on a Belgian
    site named, whose writers in turn had stumbled upon an article in
    French newspaper Le Figaro, whose writer Jean-Pierre Robin had leafed through a
    brand new IMF report (yes, there are certain linguistic advantages in being
    Dutch, Canadian AND Québecois). In the report, the IMF talks about a proposal to
    tax everybody’s savings, in the Eurozone. Looks like they just need to figure
    out by how much.

    The IMF, I’m following Mr. Robin here, addresses the issue of the
    sustainability of the debt levels of developed nations, Europe, US, Japan, which
    today are on average 110% of GDP, or 35% more than in 2007. Such debt levels are
    unprecedented, other than right after the world wars. So, the Fund reasons, it’s
    time for radical solutions.

    The IMF refers to a few studies, like one from 1990 by Barry Eichengreen on
    historical precedents, one from April 2013 by Saxo Bank chief economist Steen
    Jakobsen, who saw a 10% general asset tax as needed to repair government debt
    levels, and one by German economist Stefan Bach, who concluded that if all
    Germans owning more than €250,000, representing €2.95 trillion in wealth, were
    “supertaxed” on their assets at a 3.4% rate, the government could collect €100
    billion, or 4% of GDP.

    French investor site talks about people close to the Elysée
    government discussing how a 17% supertax on all French savings over €100,000
    would clear all government debt. The site is not the only voice to mention that
    raising “normal” taxes on either individuals or corporations is no longer
    viable, since it would risk plunging various economies into recession or

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