Hollande’s Government Cautiously Moves Towards Pension Reform

The Prime Minister Jean-Marc Ayrault on September 5th. Photo: afp.com/Patrick Kovarik

Prime Minister Jean-Marc Ayrault. Photo: afp.com/Patrick Kovarik

In a televised presentation aired August 27, French Prime Minister Jean-Marc Ayrault announced the planned reform of the pension system. However as much as European officials and others in France have called for structural reform of the system, the consensus is that the socialist government’s reform is cautious.

Because a system of social protections is deeply ingrained in French society, anytime it comes under question or revision debate, controversy, and protests are sure to follow. At a time when the French economy shows little improvement — the unemployment rate stands at 11 percent — and France struggles to be a more competitive economy, the leftist government chose not to deliver an overhaul of the pension system as was encouraged.

France’s failure to reach the economic goals set up by the European Commission has caused European officials to demand France carry out structural reforms to obtain their goals. France received an extra two years to attain the Commission’s goal of taming France’s deficit, bringing it under three percent of GDP by 2015. As a result, the sustainability of France’s generous pension system came into question.

The EC put pressure on Paris when it released reports that calculated France would be 20 billion euros in debt by 2020 if its pension system went unchanged. An analysis in France’s leading newspaper Le Monde explains why the pension reform is a necessity for France. The straining of the system can be attributed to rising life expectancy and an imbalance of the young and old generations as “baby boomers” — those born between 1943 and 1955 — outweigh the rest.  Today, observers in Europe, including the French, say that how President François Hollande’s government handles pension reform will set the tone for the rest of his presidency.

Prime Minister Ayrault opened his televised speech to introduce pension reform by reminding that the French are “attached” to their pension system thereby pushing France to “preserve this heritage.” After talking to unions and employers for two days, Ayrault stated “the reform would increase worker and company contributions proportionally” by 0.15 percent starting in 2014. However the prime minister promised that the hike in taxes for businesses — who are struggling to stay competitive in the world economy — would be countered by lower social charges that employers owe on workers’ salaries.

Currently the French must pay 41.5 years into the system. Under the reform, the number of years an individual must pay into the system to receive full benefits will be raised to 43, accomplished through a “gradual process” to be done by 2035. Therefore this measure will affect those born after 1973.

Ayrault explained, “The reform that I’m proposing aims to fix the accounts in a lasting way while also removing sources of injustice.” This includes closing the pension gap between men and women, and adding a point system for those in strenuous jobs –physically difficult or dangerous ones — that will award earlier retirement.

This reform is supposed to save the system 7.3 billion euros by 2020 and completely balance out the pension budget by 2040. Government officials from the left have emphasized that the reform is the most “progressive” yet, saying that it is rooted in social justice. Leader of the Partie Socialiste in the National Assembly, Bruno Le Roux said that the reform is “a fruitful compromise between social partners.”

Meanwhile, criticism from the right and European officials says that this reform is not structural, thus going against the advice of the Commission. Unlike what most other European countries have done, France did not increase the retirement age, which currently stands at 62. Germany’s legal retirement age is 65, for example.

Officials from the right complained that Hollande’s reform is a simple extension of the reforms instituted in 2010 — which incited mass protests — rather than an overhaul. Believing that the pension system needs saving, former Prime Minister UMP François Fillon said Wednesday that the pension reform was “cowardly,” and “in reality there is no reform, there is a tax increase.” Many politicians that fall towards the right political spectrum in France hope to see the pension system one day aligned publicly and privately.

Response from Medef, the largest employers’ union in France, has also been negative. Its leader has denounced the new measures, speaking with Le Figaro, “This is a dangerous reform that is not acceptable to us. In truth it is a non-reform: no structural problem is resolved. The government only taxes and taxes.” Arguing that French businesses, that “alone create jobs,” are “asphyxiated.”  Medef warned that raising taxes will keep the unemployment rate from falling.

Since taking office last year, Hollande’s government has introduced 27 billion euros in new taxes, and the newest reform is just another addition. Named as the biggest test yet for Hollande and his government, the proposal is set to be presented to the cabinet next month and to be debated in parliament by October.  However September 10 has already been scheduled as a day of protest and work stoppages in France against the reform, organized by workers’ unions CGT, FSU, and Solidarity.


  1. […] Hollande’s Government Cautiously Moves Towards Pension Reform (lajeunepolitique.com) […]

  2. […] S&P’s analysis did not take enough factors into account, arguing that recently implemented pension reforms were not given enough […]

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