Pension reform in France: French workers can retire much earlier than most. That’s going to change


London/Paris
CNN

The French government plans to raise the statutory retirement age by two years as part of a long-delayed reform of the country’s pension system prompted unions to call nationwide strikes next week.

New laws require French citizens to work until the age of 64 to be entitled to a full pension. Starting in September of this year, the regular retirement age will be increased by three months every year until 2030.

The higher retirement age should approach a pension funding deficit, Prime Minister Élisabeth Borne told reporters on Tuesday as she outlined the reforms.

“I am well aware that changing our pension system raises questions and fears among the French,” she said, adding that it would be “inexcusable” to let the deficit grow.

The proposed reforms will bring in about 17.7 billion euros ($19 billion) annually through 2030, Finance Minister Bruno Le Maire said at the press conference.

Other changes Borne announced include increasing the minimum monthly pension and counting maternity leave against a woman’s working years. Those who started work under the age of 16 are entitled to a pension at 58, she said.

From 2027, a person must have worked 43 years to receive the full state pension.

French Prime Minister Élisabeth Borne at a press conference in Paris to unveil the government's pension reform plan on January 10, 2023.

The transformation of the pension system was a key element of French President Emmanuel Macron’s election campaign.

“The goal is to consolidate our pay-as-you-go pension plans, which would otherwise be jeopardized by financing on credit,” he said in a New Year’s address.

An earlier attempt by Macron to overhaul the pension system was met with nationwide strikes in 2019 before being abandoned during the Covid-19 pandemic.

Unions had already pledged to oppose the new law and they were quick to respond to Tuesday’s announcement by calling for “a first day of strikes and protests” next week.

“January 19 is the start of the mobilization to prevent the reform from being implemented and to persuade the government to withdraw,” Laurent Berger, general secretary of France’s largest trade union, the CFDT, told journalists on Tuesday. “Nothing justifies such a brutal reform,” he added.

Workers in France were squeezed by rising food and energy bills, and thousands took part in mass demonstrations against the cost of living on the streets of Paris last year. strikes City workers demanding higher wages ran gas pumps dry across the country a few months ago.

According to the Organization for Economic Co-operation and Development, France spent almost 14% of GDP on state pensions in 2018, more than most other countries.

In 2019, it had the highest social spending of any country in the European Union, at almost 34% of GDP, according to Eurostat. This compares to 28% in the European Union as a whole.

The government argues that changes are needed to make the system financially sustainable.

“Government agencies are forecasting massive deficits in the coming years as boomers continue to retire and need to make changes very quickly otherwise they lose money to invest in other things,” said Renaud Foucart, senior economics lecturer at Lancaster University in UK .

Raising the retirement age to 64 will keep France below the norm in Europe and many other developed economies, where the age at which full pension benefits apply is 65 and is increasingly moving towards 67.

In the United States and the United Kingdom, the retirement age ranges from 66 to 67, depending on the year of birth. Current legislation in the UK calls for a gradual increase to 68 between 2044 and 2046, although this is under review and could change.

Nevertheless, according to Foucart, the pension reform in France is “very unpopular”. “It’s considered taboo,” he added.

Passing the reforms is all but certain, although Macron’s party lacks an absolute majority in the French parliament. In the absence of support from opposition MPs, the government could resort to Article 49.3 of the French Constitution, a mechanism it has used on several occasions to pass budget-related bills without putting them to a parliamentary vote.

— Marguerite Lacroix contributed to this report.

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