Tue, Sep 03, 2013 - Page 7 News List

Hollande’s pension reform proposal falls short of promises, research report says


The Socialist government’s plans to reform France’s debt-ridden pension system, to be presented to ministers this month, fail to address the core problems and could spark fresh tensions with Brussels, experts say.

Pension reforms are highly contentious in France — with previous efforts in 1995 and 2010 unleashing mass protests and damaging strikes — and this latest effort could be the biggest test yet for French President Francois Hollande.

Hollande’s government stuck to his promise not to increase the current retirement age of 62 as many other countries have done following Brussels’ recommendation.

The reform plan, which will be officially tabled on Sept. 18, avoids some of the more controversial proposals floated in recent weeks that included slapping a new tax on French retirees.

Instead, the government proposes that employees as well as businesses pay more every month to France’s retirement system, a measure sure to raise eyebrows with the cost of the generous social net already one of the highest in the world.

French businesses had campaigned against an increase in taxes or contributions, fearing the impact they would have have on competitiveness. The French economy is grappling with record unemployment, a high cost of labor and a huge tax burden. The plan also incrementally raises a French worker’s contribution period from the current 41.5 years to 43 years by 2035. This effectively means that most people will have to work beyond 62 to qualify for a full pension.

The government said the measures would save the state’s strained retirement system 7.3 billion euros (US$9.6 billion) by 2020, with the books balanced by 2040.

However, there is growing criticism that the reforms are not deep enough.

“The measures are disappointing. They will only address the deficit of the general pension scheme for private sector employees, not that of the overall pension system,” HSBC Global Research said.

It said that the pension system will be “still in a deficit of 13.6 billion euros in 2020 according to the French pension council even if all the measures announced are applied.”

Sixty-two percent of French people said they were opposed to the reforms, in an opinion poll published on Saturday for i-Tele. And 67 percent said they felt the proposals were not “fair.” The poll comprised 1,010 people and was conducted from Aug. 29 to 30.

The head of France’s largest employers’ confederation Pierre Gattaz said the plans amounted to zero.

“This is a dangerous reform that is not acceptable to us. In reality, it is a non-reform: No structural problem is resolved,” he told Le Figaro newspaper.

The European Commission had asked France to increase both the minimum and full pension ages and to review many exemptions in the system.

HSBC Global Research warned that “the European Commission could tell France that the proposed reforms do not go far enough,” as the plan “addresses the pension deficit through tax hikes rather than spending measures.”

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