FacebookTwitterGoogle+RedditEmail

The Move to Gut French Pensions

by TOM GILL

A showdown between the French Government and unions is looming over  reforms to the country’s ‘generous’ pension system.

Strikes and protests are scheduled for September 10 in response to plans by the Socialist administration of President Francois Hollande to extend the 41.5-year contribution payment period required for a full pension and other possible changes.

Hollande has indicated he has no intention of touching the retirement age that former President Nicolas Sarkozy raised to 62 from 60, having fulfilled a campaign pledge to roll it back for those who started work early. Nor is he minded to trim annual pension increases to below inflation, another option under consideration.

Employers berate the President for timidity, and say more cuts to the system are needed to plug an expected 20 billion euro funding gap in the system by 2020.

‘We cannot wait any longer and be content with half-measures because our pension system is in a disastrous state,’ the new head of France’s Medef employers organisation Pierre Gattaz wrote in an op-ed in Le Monde newspaper this week

Medef will be making this point at a meeting with the government and unions on Monday and Tuesday, when Prime Minister Jean-Marc Ayrault is expected to formally outline the reform plans.

Gattaz said it was ‘urgent’ to review pension arrangements allowing the military, police and others to retire much younger, although Hollande is expected to leave them unchanged too.

The head of the Medef employers’ group also called for France’s state-dominated pension system to be curtailed and a bigger role given to privately funded pensions.

Public spending on pensions is 14.4 percent of output in France versus 12.9 percent in the EU.

Businesses in the eurozone’s second-largest economy, which has just exited recession, fret about  a prospective rise in payroll taxes as part of the pension system reform. Gattaz claims that increasing their contributions would hurt employment further at a time when more people are out of a job in France than ever before.

And it is not just employers breathing down Hollande’s neck – the European Commission is reportedly looking for indications that the government is  serious about ‘reform’ in exchange for agreeing some loosening of the country’s timetable in reigning in its deficit.

Hollande is right to fear a popular backlash against changes to the country’s pensions system. All past attempts – including under Sarkozy – have encountered weeks of demonstrations and costly industrial strikes.

But is ‘reform’ – in the modern turn-the-clock-back meaning of the word –  inevitable?

First, it is important to clear up the nonsense that pensions are generous in France –  the average pension is only 60 percent of working-age post-tax income, versus the 69 percent average for industrialised countries.

Second, companies will be able to claw back much of the rise in employer contributions (+ 0.1%, or 3 billion euros) expected in the changes, through tax breaks, and they will still be paying less than they did 20 odd years ago, point out Catherine Mills, Senior Honorary Lecturer at the University of Paris I Panthéon Sorbonne, and Frederick Rauch, editor of the journal Économie et Politique.

Third, the problem is not the cost of the system per se, but the lack of funds to underpin it.  In an article in L’Humanite newspaper, Mills and Rauch point out that this is due to rising unemployment and downward pressure on wages, the result of austerity policies pursued in France and Europe, and the fact that firms are more than ever putting shareholders before employees.

Firms now pay out twice as much to their owners and for their financing needs than on payroll taxes. Indeed, the proportion of companies’ financial resources  handed out as dividends has risen from 30% to 80% since the end of the 1980s, according to a report in Alternatives Economiques.  And a tidy 100 billion euros were pocketed by fat cat shareholders of France’s largest companies in the three years to 2011 alone.

The two economists calculate that a drop in the wages paid by employers of 1% costs the pension system 800 million euros in revenue. When the country has 100,000 more unemployed, the pension system loses 1 billion euros in funding. Thanks to economic rigor in France and across the Continent, the country now has over 10% out of work. ‘Thus boosting employment and wages is the key to making the pension system sustainable,’ say Mills and Rauch.

All of which implies an end to the mad, self-defeating austerity policies prevailing across Europe, and a radical ‘reform’ (in the traditional sense of the word) of the capitalist system.

Tom Gill blogs at www.revolting-europe.com 

Tom Gill edits Revolting Europe.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

April 25, 2017
Russell Mokhiber
It’s Impossible to Support Single-Payer and Defend Obamacare
Nozomi Hayase
Prosecution of Assange is Persecution of Free Speech
Robert Fisk
The Madder Trump Gets, the More Seriously the World Takes Him
Giles Longley-Cook
Trump the Gardener
Bill Quigley
Major Challenges of New Orleans Charter Schools Exposed at NAACP Hearing
Jack Random
Little Fingers and Big Egos
Stanley L. Cohen
Dissent on the Lower East Side: the Post-Political Condition
Stephen Cooper
Conscientious Justice-Loving Alabamians, Speak Up!
Michael J. Sainato
Did the NRA Play a Role in the Forcing the Resignation of Surgeon General?
David Swanson
The F-35 and the Incinerating Ski Slope
Binoy Kampmark
Mike Pence in Oz
Peter Paul Catterall
Green Nationalism? How the Far Right Could Learn to Love the Environment
George Wuerthner
Range Riders: Making Tom Sawyer Proud
Clancy Sigal
It’s the Pits: the Miner’s Blues
Robert K. Tan
Abe is Taking Japan Back to the Bad Old Fascism
April 24, 2017
Mike Whitney
Is Mad Dog Planning to Invade East Syria?    
John Steppling
Puritan Jackals
Robert Hunziker
America’s Tale of Two Cities, Redux
David Jaffe
The Republican Party and the ‘Lunatic Right’
John Davis
No Tomorrow or Fashion-Forward
Patrick Cockburn
Treating Mental Health Patients as Criminals
Jack Dresser
An Accelerating Palestine Rights Movement Faces Uncertain Direction
George Wuerthner
Diet for a Warming Planet
Lawrence Wittner
Why Is There So Little Popular Protest Against Today’s Threats of Nuclear War?
Colin Todhunter
From Earth Day to the Monsanto Tribunal, Capitalism on Trial
Paul Bentley
Teacher’s Out in Front
Franklin Lamb
A Post-Christian Middle East With or Without ISIS?
Kevin Martin
We Just Paid our Taxes — are They Making the U.S. and the World Safer?
Erik Mears
Education Reformers Lowered Teachers’ Salaries, While Promising to Raise Them
Binoy Kampmark
Fleeing the Ratpac: James Packer, Gambling and Hollywood
Weekend Edition
April 21, 2017
Friday - Sunday
Diana Johnstone
The Main Issue in the French Presidential Election: National Sovereignty
Paul Street
Donald Trump: Ruling Class President
Jeffrey St. Clair
Roaming Charges: Dude, Where’s My War?
Andrew Levine
If You Can’t Beat ‘Em, Join ‘Em
Paul Atwood
Why Does North Korea Want Nukes?
Robert Hunziker
Trump and Global Warming Destroy Rivers
Vijay Prashad
Turkey, After the Referendum
Binoy Kampmark
Trump, the DOJ and Julian Assange
CJ Hopkins
The President Formerly Known as Hitler
Steve Reyna
Replacing Lady Liberty: Trump and the American Way
Lucy Steigerwald
Stop Suggesting Mandatory National Service as a Fix for America’s Problems
Robert Fisk
It is Not Just Assad Who is “Responsible” for the Rise of ISIS
John Laforge
“Strike Two” Against Canadian Radioactive Waste Dumpsite Proposal
Norman Solomon
The Democratic Party’s Anti-Bernie Elites Have a Huge Stake in Blaming Russia
Andrew Stewart
Can We Finally Get Over Bernie Sanders?
FacebookTwitterGoogle+RedditEmail