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The Reform of French Pensions
By Hugh Schofield, Expatica
September 7, 2004
"The reform that is before us requires a burst of solidarity, the overcoming of selfishness, and collective ambition," Raffarin said in a speech before the Economic and Social Council (CES), a government advisory board made up of academics and representatives of business, unions and family groups.
Alarmed by figures that show the number of retired workers reaching unmanageable proportions by 2020, Raffarin promised legislation by this summer which will probably include the provision of top-up saving schemes and longer contribution periods in the public sector.
However, union resistance to any change that threatens the country's current generous provision has been illustrated by mass protest demonstrations across the country, and Raffarin made it clear he intends to prepare his programme with a lengthy period of public consultation.
In his February 3 presentation before the CES, he said that he had "heard the concerns of the demonstrators in the streets", vowing: "My government will not let the social pact on pensions be destroyed."
Successive French governments have shirked the task of changing the country's "pay-as-you-go" pension system, and the last serious attempt to modernise it - under former prime minister Alain Juppe in 1995 - ended in a forced retreat in the face of street protests.
However, during his re-election campaign last year, President Jacques Chirac said pensions would be a centrepiece of his second mandate, and commentators say the government's success or failure in the coming months will be a measure of its ability to undertake wider economic reform.
"Suffocating financially, socially arthritic, traumatised at home and uncertain abroad - France has gone a very long time since it last calmly undertook any major social or economic reform," according to Jean de Belot, editor of the conservative daily Le Figaro.
"But pensions could constitute exactly the right kind of starting-point - to kickstart a virtuous cycle of other consensus-based change and unblock the country's paralysis," he said.
The debate over pensions comes as right-wing and liberal observers of Raffarin's government express growing exasperation at its hesitancy before radical economic reform - and at what they say is its fear of antagonising entrenched sectoral interests.
Under France's pensions scheme, workers pay contributions which are then divided out among those in retirement - representing in Chirac's words "a pact between the generations" - and governments of all shades have rejected calls for British or US-style capitalised funds.
However the system will come under intolerable strain as the post-war baby boom generation leaves the workforce, with the prospect of a longer life span in retirement as a result of improvements in diet, medicine and lifestyle.
Raffarin said his government was open to a debate on lengthening the contribution periods for public employees from the current 37.5 years to possibly match the 40 years required for a full pension in the private sector. The government was encouraged in this by a public opinion poll in January which showed 78 percent in favour of the proposal.
The prime minister also put forth two other ideas favoured by Chirac - helping workers open personal retirement savings accounts to supplement their state-guaranteed pensions, and a flexible retirement age so that those who wish to can continue working into their 60s.
While he insisted that the legal retirement age of 60 would not be called into question, Raffarin indicated that the government would encourage people to work beyond that age, with the lure of larger pensions as a result.
He said reform would be gradual and flexible, hinting it could be reviewed periodically, possibly every five years.
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