Clash Expected Over French Pensions

By Katrin Benhold, International Herald Tribune

France

September 13, 2007

President Nicolas Sarkozy of France is preparing to ask a small but powerful group of unionized workers to relinquish jealously guarded pension privileges, the opening gambit in a series of proposed labor changes.

At issue are the "special regimes," the generous pension agreements enjoyed in certain industries and notably by employees of the state-owned rail company SNCF and the energy giants Électricité de France and Gaz de France.

The last time a government tried to deprive train drivers of the right to retire at age 50 and some electricity workers at 55 was in 1995, triggering a three-week nationwide transit strike that forced the government to retreat. These events help explain the reluctance of successive administrations to be bold on economic changes in general.

Sarkozy has a detailed plan of how to implement the changes, which could take effect next year, officials said Wednesday. It will be a crucial test of his determination and ability to shake up French economic foundations - and a test of the unions' power.

As Sarkozy, facing the first signs of eroding popularity since he was elected four months ago, prepares for a speech on pension changes Tuesday, the CFDT union, the largest in France, has warned of a "major conflict" if the government fails to consult with employees. The CGT, the dominant union in state-owned companies, spoke of a strike.

"There could be sport, and not just in the rugby stadiums, if the government persists in a fait accompli," Bernard Thibault, the leader of the CGT, said this week.

Officials said Sarkozy was betting that a swift overhaul of the special regimes would weaken the unions and provide his government with the necessary momentum to push through his other proposals - including plans to further relax the 35-hour workweek and to make it easier to hire and fire employees. At a time when sluggish economic growth could limit Sarkozy's ability to fulfill expensive campaign promises, the changes could free up billions of euros and help placate neighbors in the European Union who complain that France is lax in reining in its public deficit.

About 1.1 million retirees were covered by the special regimes in 2003, accounting for about 6.4 percent of total pension payments, according to the latest figures available by the Pensions Advisory Council, an independent body that reports to the French prime minister's office. But because the pensions are financed by 500,000 employees, the pensions create a combined deficit of about €7 billion, or $9.7 billion - almost all of the national pension deficit, said Didier Blanchet, head of economic studies at the French statistics office Insee and a member of the council. The council predicts that by 2050, in the absence of changes, the special regimes would record a deficit of €8 billion while the overall deficit is projected to balloon to €123 billion.

"Reforming the special regimes does not solve the overall pension problem," said Monika Queisser, a pension expert at the Organization for Economic Cooperation and Development in Paris.

But analysts like Queisser and Blanchet said that selling further pension changes to the broader public - notably an increase in the retirement age, which is among the lowest in Europe - hinges on eliminating the privileges enjoyed by some state employees.

Pensions for the private sector were partially overhauled in 1993 and those for civil servants 10 years later, in each case gradually increasing the number of years employees have to pay into the state-run pay-as-you-go system, to 40 years in 2008. Workers with SNCF, Électricité de France and Gaz de France, as well as an assorted group of other professionals, earn full pension rights after contributing for 37.5 years.

The right of train drivers to retire at 50 dates to the 1930s when locomotives were still powered by coal and the life expectancy of rail workers was significantly lower than the national average. In 1995, opinion polls showed that the public largely supported striking rail workers, but this may no longer be true today. A poll by the CSA institute published shortly after Sarkozy was elected showed that 56 percent of respondents were in favor of a "rapid" overhaul of the special regimes.

Even the opposition Socialist Party softened its stance in recent days. On Tuesday, it called for a level playing field. Privately, unions have expressed concern that they will not have the same ability to mobilize as 12 years ago. But officially, the tone remains defiant, with some demanding that the whole country retire at 50.
 

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