Macron moves for pension reforms again, strong resistance expected

Undeterred by a strong resistance, French President Emmanuel Macron is going for a new pension reform yet again with the resultant and expected backlash to follow.

In this connection, Prime Minister Elisabeth Borne will announce the plan Tuesday today, as Macron insists the reforms are needed to salvage a system that is unsustainable in its current form. But many are not convinced.

Macron is serving his second term as France’s president but overhauling the pension system is a long-standing promise that dates all the way back to when he was first elected in 2017.

The centrepiece of the legislation will be raising the retirement age from 62 to as late as 65 or face having monthly payouts curtailed – a proposal that both the political opposition and unions find particularly galling, and which has led to widespread protests and strikes.

In late 2019, his government proposed a single, points-based system, which enabled a person to retire once they had gained a certain number of points. The idea was a harmonization of the rules across sectors.

But the demonstrations brought much of Paris to a halt in the winter of 2019-2020 before reform plans were temporarily shelved when Covid struck France in earnest in the spring. One of France’s more moderate unions, the CFDT, sat the strikes out, but now even the CFDT is vowing to call on its members to strike to protest raising the retirement age.

“This year will be one of pension reform, aiming to balance our system in the years and decades to come,” Macron said during his New Year’s address.

“As I promised you, this year will indeed be that of a pension reform, which aims to ensure the balance of our system for the years and decades to come.”

He added that he wants to conclude negotiations in time for new rules to be applicable from the end of summer 2023.

Previous rounds of pension reform are already being implemented. The Touraine reform, voted in under Macron’s predecessor François Holland, gradually extends the amount of time people must pay into the system to 43 years (for those born in or after 1973) before they can retire on a full pension.

Critics have often cast France’s pension system as byzantine or convoluted, in part because it consists of 42 different state-supported pension schemes. The entire pensions system cost the government just under 14 percent of GDP in 2021. 

But some of the government’s own agencies refute Macron’s claims that the current system would be moribund without urgent action.

A September 2022 report by the Pensions Advisory Council found the pensions system actually produced surpluses in 2021 (€900 million) and 2022 (€3.2 billion), although it did predict the system would run a deficit on average over the next quarter of a century.

It estimates that “between 2023 and 2027, the pension system’s finances will deteriorate significantly”, reaching a deficit of between 0.3 and 0.4 percent of GDP (or just over €10 billion a year) until 2032. But the council said it estimates a gradual return to breaking even, even without reforms, beginning in the mid-2030s.

A deficit of €10 billion to €12 billion per year is not necessarily excessive for a pension system whose total annual expenditure amounts to around €340 billion. “The results of this report do not support the claim that pensions spending is out of control,” the council wrote.

The report also noted that pensions spending as a proportion of GDP is expected to remain stable, at around 14 percent of GDP, before rising to up to 14.7 percent by 2032.

The pensions report makes it clear that the current system is not necessarily in danger, said Michael Zemmour, an economist and pensions expert at Paris 1 University.

“It has become a form of political discourse to exaggerate and dramatise the deficit issue, to claim the system urgently needs to be reformed, when in fact the deficit is rather moderate,” Zemmour said.

No doubt there will be something of a shortfall, he said, but not the kind of deficit that would require raising the retirement age.

Zemmour noted that a document France sent to the EU last summer outlines how Macron is planning to pay for proposed tax cuts with structural reforms to get the national deficit under 3 percent – as required of EU member states – by 2027. “It’s not about saving the pension system, it’s about financing tax cuts for businesses,” he said.

Macron has argued that France has neither the highest retirement age nor the longest required contribution period compared with its EU neighbours. And he has a point. On average, the French still retire earlier than in many neighbouring countries.

According to the Pensions Advisory Council, the average age at which French nationals begin tapping into their retirement funds was 62.6 for women and 62 for men in 2019. That same year, the average age in Italy for both sexes was 63, 64 in Germany and 66 in the Netherlands, with women on average retiring a few months later than men.

Ironically, raising the retirement age can lead to financial insecurity for people at the end of their careers, Zemmour said. 

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