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

Weekend Edition
February 24, 2017
Friday - Sunday
Pierre M. Sprey - Franklin “Chuck” Spinney
Sleepwalking Into a Nuclear Arms Race with Russia
Jeffrey St. Clair
Roaming Charges: Exxon’s End Game Theory
John Laforge
Did Obama Pave the Way for More Torture?
Ajamu Baraka
Malcolm X and Human Rights in the Time of Trumpism:  Transcending the Masters tools
Paul Street
Liberal Hypocrisy, “Late-Shaming,” and Russia-Blaming in the Age of Trump
Vijay Prashad
A Foreign Policy of Cruel Populism
John Chuckman
Israel’s Terrible Problem: Two States or One?
Matthew Stevenson
The Parallax View of Donald Trump
Stan Cox
Can the Climate Survive Electoral Democracy? Maybe. Can It Survive Capitalism? No.
Ramzy Baroud
The Trump-Netanyahu Circus: Now, No One Can Save Israel from Itself
Chuck Collins
Wall Street Hopes You’ve Forgotten the Crash Already
Edward Hunt
The United States of Permanent War
Pete Dolack
The Bait and Switch of Public-Private Partnerships
Elliot Sperber
Why Resistance is Insufficient
Brian Cloughley
What are You Going to Do About Afghanistan, President Trump?
Binoy Kampmark
Warring in the Oncology Ward
Yves Engler
Remembering the Coup in Ghana
Jeremy Brecher
“Climate Kids” v. Trump: Trial of the Century Pits Trump Climate Denialism Against Right to a Climate System Capable of Sustaining Human Life”
Franklin Lamb
Another Small Step for Syrian Refugee Children in Beirut’s “Aleppo Park”
Ron Jacobs
The Realist: Irreverence Was Their Only Sacred Cow
Robert Koehler
Costa Rica’s Peace Journey
Andre Vltchek
Lock up England in Jail or an Insane Asylum!
Paul DeRienzo
Three Years Since the Kitty Litter Disaster at Waste Isolation Pilot Plant
Eric Sommer
Organize Workers Immigrant Defense Committees!
Steve Cooper
A Progressive Agenda
Andrew Stewart
The 4CHAN Presidency: A Media Critique of the Alt-Right
Edward Leer
Tripping USA: The Chair
Nyla Ali Khan
One Certain Effect of Instability in Kashmir is the Erosion of Freedom of Expression and Regional Integration
Rob Hager
The Only Fake News That Probably Threw the Election to Trump was not Russian 
Mark Dickman
The Prophet: Deutscher’s Trotsky
Christopher Brauchli
The Politics of the Toilet Police
Charles R. Larson
Review: Timothy B. Tyson’s “The Blood of Emmett Till”
February 23, 2017
Dave Brotherton
Trump, Moral Panics and Resistance
Jonathan Cook
One State: Trump Has Reminded Palestinians What It Was Always About
Bill Quigley
Ten Examples of Direct Resistance to Stop Government Raids
Linn Washington Jr.
Bigot Boy Business: Trump Exposes His Ignorance and Intolerance, Again
John W. Whitehead
The Illusion of Freedom: the Police State Is Alive and Well
Ralph Nader
Restricting People’s Use of Their Courts
David Macaray
Women As Labor Union Organizers
Kathy Kelly
Friendship in Defiance of War
Doug Weir
Why Did the US Use Depleted Uranium Weapons in Syria?
Steve Horn
Former GOP Congressional Staffer Follows Revolving Door, Now Latest Keystone XL Lobbyist
Binoy Kampmark
From Rights to Repentance: Norma McCorvey and Roe v Wade
Thomas Knapp
The Target of the “Border Adjustment Tax” is You
Chris Zinda
Open Letter to Neoliberal Environmentalists
FacebookTwitterGoogle+RedditEmail