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June 6, 2003
mobilisation on the boulevards of Paris this week - half a million
demonstrators, say the police; a million and a half, say the unions.
Either way, trains stopped, flights were cancelled and schools shut -
though there is an entirely separate dispute going on (Charles Clarke
would love this) with French teachers striking against plans to "decentralise"
school funding to regional bodies.
The casus belli is pension
reform. A rolling programme of public sector strikes began last month to
halt government plans. At issue are cuts to the civil service scheme
(which includes teachers as well as train and metro drivers), to bring it
in line with private sector provision. Austria, too, this week saw its
biggest postwar strike over raising the retirement age to 65. Hardly
radical-sounding, you might say. Here "leftwing" thinktanks are
canvassing to raise it to 70. But there it's a rupture in a generation's
expectations and, says the Austrian TUC, "nix geht".
France and Austria have
right-of-centre governments, ditto Italy where pension reform could yet
break the otherwise impregnable Berlusconi government; but pension reform
is also scarring social democrat backs in Berlin. For a decade, pensions
pessimists have been predicting this moment of crisis, when expectations
of what can be afforded are dramatically scaled back.
The Organisation for Economic
Cooperation and Development, employers' groups and neo-liberals revel in
the idea of pension pain; they dislike redistributive taxation and state
provision as a matter of principle. But neutral actuaries and demographers
point to trends in ageing and the irreversible decline in population in
Italy and Germany. With eurozone growth rates in the doldrums and not
looking like they will bounce back for some time, if ever, pensions are
going to take a rising share of GDP, whatever the mix of state or
occupational provision. That must mean younger workers paying a lot more
tax in high-tax countries - cue the "time bomb" metaphor.
In 1995, for every three people
of working age, one was retired. In just over a quarter century it will be
nearly one pensioner to two workers. Pensioners are also living longer. So
the pensions sadists have a point; there are no painless solu tions.
Saving more means consuming less and, besides, does not guarantee the GDP
growth that would make it easier to transfer income to pensioners in the
Yet what's striking on the
continent is how little the neo-Thatcherite rhetoric about rolling back
the state plays. Most reform schemes (and all governments have them) would
leave schemes that are solidly statist.
Take France. Changes have been
made. In the early 1990s, when the centre-right was in power, France went
through a downsizing exercise when private (but not public) sector
pensions were indexed to prices rather than earnings. But cost projections
are still shocking.
Social affairs minister François
Fillon is starting with public sector pensions. He wants to raise the 37.5
years' minimum period of service - before a full civil service pension
becomes payable - to the private sector norm of 40 years. Benefits would
be trimmed while contributions would rise, leaving staff to pay 5% of
salary. For comparison, British council workers pay 6% and in the
Netherlands the maximum contribution rate for state pensions is 16.5%.
Yes, French "rightwing" proposals are remarkably generous. Under
them, mothers get two years' pension rights for every child and 10% of
total salary is counted in for pension purposes if they have three
children. The Fillon plan is redistributive and boosts rights for the low
paid; Gordon Brown's minimum income guarantee offers £102 a week. The
French reform offers private sector workers on the minimum wage a pension
worth £138 (£155 for low-paid public sector workers). In response,
French unions are split. The traditionally more moderate CFDT says the
reforms are negotiable.
The government calculation is
that the public at large will see the reforms as reasonable. It is a high
stakes play. "Middle France" is notoriously unpredictable in its
responses to crisis; unlike middle England, it has in the past leapt
leftwards. In 1995 Alain Juppé's government fell when the public failed
to back less radical reforms. Jacques Chirac might have stood tall as a
man of principle before the Iraq war but back home he intrigues with
potential successors to Jean-Pierre Raffarin, who was installed as prime
minister of the Union for the Presidential Majority last year. Raffarin
becomes expendable if Chirac feels protests have public backing.
The French left is no less
opportunist. Had the socialist party continued in power last May, its
ministers would have introduced not dissimilar reforms. There is an
unmistakably reactionary dimension to the strikes, say commentators such
as Jacques Juilliard: if the unions can bring down a government now, what
chance would a future left-of-centre regime have if the right mobilised
on, say, asylum or tax?
The Raffarin government could have been more sure-footed just as, in Austria, Wolfgang Schüssel's cabinet has a credibility deficit bigger than the ego of Jorg Heider, its former far-right member. None the less, pensions are a test of "system capacity", the way states and political parties can reconcile inter-generational interests and take the proverbial long view.