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France: Pensions nouveaux

By Mark Milner, The Guardian

  June 2, 2003

This week France faces the possibility of an all-out transport strike. Unions are furious at the government's plans to reform the country's generous pay-as-you go pensions scheme.

They have already fired a warning shot across the bows of the ship of state but captain Jacques Chirac and his first lieutenant Jean-Pierre Raffarin are steaming on regardless.

The government's thinking is easy to understand. At present, retirement pensions are funded by today's workers, whose own pensions will in turn be paid for by the next generation of wage earners. It is supposed to be a pyramid - with more workers than pensioners.

But demographics are changing the rules of the game. As the workforce shrinks and pensioners live longer, the pyramid, according to one French commentator, is in danger of turning into a mushroom - a top-heavy burden of liabilities supported by a slender stalk of resources.

The proposed reforms will mean French workers working on beyond age 60. The government also wants to bring the public sector into line with the private sector by extending their pension contribution period from 37.5 years to 40.

It's not the first time the French government has tried to reform the pensions system. It did so in the mid-1990s and sparked a storm of opposition. The protests effectively wrecked the administration of then prime minister Alain Juppé.

This time Mr Raffarin looks to have more firepower. Opinion polls show the French are aware of the need for reform, while the socialists are still trying to regroup after the hammering handed out at the last election. One of the main union groups has acquiesced although that appears to have hardened the resolves of the other two main groups.

Time is of the essence. As the postwar baby boomer generation moves closer to retirement, future administrations may find it harder to win political support for reform. Turkeys don't vote for Christmas.

Nor is the battle in France a purely domestic affair. Germany and Italy are among those countries with looming pension problems.

The German chancellor, Gerhard Schröder, yesterday managed to get the backing of his party for his Agenda 2010 reform programme - which includes changes to pension provision - but that does not mean opposition is at an end.

Germany's trade unions may be looking to take a less confrontational approach than their French colleagues but they will want a say in what happens. And it would not take many from the left of Mr Schröder's party in parliament to vote against the proposals to leave the chancellor considering his future career options.

A victory for the French unions would resonate powerfully on the other side of the Rhine. This week could be the beginning of a long hot summer.

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