FacebookTwitterGoogle+RedditEmail

The Move to Gut French Pensions

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 

More articles by:

Tom Gill edits Revolting Europe.

Weekend Edition
April 20, 2018
Friday - Sunday
Paul Street
Ruling Class Operatives Say the Darndest Things: On Devils Known and Not
Conn Hallinan
The Great Game Comes to Syria
Jeffrey St. Clair
Roaming Charges: Mother of War
Andrew Levine
“How Come?” Questions
Doug Noble
A Tale of Two Atrocities: Douma and Gaza
Kenneth Surin
The Blight of Ukania
Howard Lisnoff
How James Comey Became the Strange New Hero of the Liberals
William Blum
Anti-Empire Report: Unseen Persons
Lawrence Davidson
Missiles Over Damascus
Patrick Cockburn
The Plight of the Yazidi of Afrin
Pete Dolack
Fooled Again? Trump Trade Policy Elevates Corporate Power
Stan Cox
For Climate Mobilization, Look to 1960s Vietnam Before Turning to 1940s America
William Hawes
Global Weirding
Dan Glazebrook
World War is Still in the Cards
Nick Pemberton
In Defense of Cardi B: Beyond Bourgeois PC Culture
Ishmael Reed
Hollywood’s Last Days?
Peter Certo
There Was Nothing Humanitarian About Our Strikes on Syria
Dean Baker
China’s “Currency Devaluation Game”
Ann Garrison
Why Don’t We All Vote to Commit International Crimes?
LEJ Rachell
The Baddest Black Power Artist You Never Heard Of
Lawrence Ware
All Hell Broke Out in Oklahoma
Franklin Lamb
Tehran’s Syria: Lebanon Colonization Project is Collapsing
Donny Swanson
Janus v. AFSCME: What’s It All About?
Will Podmore
Brexit and the Windrush Britons
Brian Saady
Boehner’s Marijuana Lobbying is Symptomatic of Special-Interest Problem
Julian Vigo
Google’s Delisting and Censorship of Information
Patrick Walker
Political Dynamite: Poor People’s Campaign and the Movement for a People’s Party
Fred Gardner
Medical Board to MDs: Emphasize Dangers of Marijuana
Rob Seimetz
We Must Stand In Solidarity With Eric Reid
Missy Comley Beattie
Remembering Barbara Bush
Wim Laven
Teaching Peace in a Time of Hate
Thomas Knapp
Freedom is Winning in the Encryption Arms Race
Mir Alikhan
There Won’t be Peace in Afghanistan Until There’s Peace in Kashmir
Robert Koehler
Playing War in Syria
Tamara Pearson
US Shootings: Gun Industry Killing More People Overseas
John Feffer
Trump’s Trade War is About Trump Not China
Morris Pearl
Why the Census Shouldn’t Ask About Citizenship
Ralph Nader
Bill Curry on the Move against Public Corruption
Josh Hoxie
Five Tax Myths Debunked
Leslie Mullin
Democratic Space in Adverse Times: Milestone at Haiti’s University of the Aristide Foundation
Louis Proyect
Syria and Neo-McCarthyism
Dean Baker
Finance 202 Meets Economics 101
Abel Cohen
Forget Gun Control, Try Bullet Control
Robert Fantina
“Damascus Time:” An Iranian Movie
David Yearsley
Bach and Taxes
FacebookTwitterGoogle+RedditEmail