Analysis: France wrestles with pension question

By Sheila Barter
BBC News Online

The French government and unions have squared up for a summer battle over reforming the pension system.

Unions say people will register their anger on the streets

Prime Minister Jean-Pierre Raffarin says France must face the reality that its pension funds need more cash to support a greying population.

In short, he wants people to pay in more money over more years before they start claiming some of it back.

But some unions have vowed to fight his reform plans tooth and nail, furious that the retirement finishing line has been moved halfway through the race.

A series of strikes and mass protests has been hitting transport, education, health and other public sectors.

What French people think of the pension reforms and strikes

In pictures

Tens of thousands of people have marched through the streets of Paris and other towns and cities.

At the heart of the reforms is a plan to force state employees to work an extra two-and-a-half years in order to claim a full pension, and raising contributions in 2008.

The last French Government which attempted the same type of pension reforms, in 1995, was crippled by street protests, and lost an election two years later.

Mr Raffarin is faced with serious conflicting pressures as he tries again to get reform past the previously immoveable object of French public opinion.

If we do nothing today, in 20 years our pensions will be reduced by a half - our system no longer corresponds to the demographic reality

Jean-Pierre Raffarin open letter

Mr Raffarin can, of course, hear the demographic "timebomb" ticking, as more people reach retirement age and live longer, while the French birthrate remains low.

He is also under pressure to meet European targets on budget deficits, and his government has announced it will freeze spending next year in an attempt to bring its predicted 3.6% deficit back within eurozone limits of 3%.

PENSION PLANS

State workers must pay in for 40 years to receive full pension -matching private sector - by 2008

Payment period to be increased to 42 years by 2020

Higher contributions from 2008

Workers to be allowed to stay on after official retirement age

Tax incentives introduced to boost company-based savings schemes

The European Commission has told France it has until October to put its affairs in order, either by cutting spending or raising taxes.

Among options being considered is slicing through France's large army of civil servants. Media reports suggest 30,000 posts will go next year through natural wastage.

But it is pension reform which analysts say presents Mr Raffarin with his most explosive challenge.

As he went into battle in early May, he placed full-page advertisements in French national papers explaining in an open letter why reform was vital.

"In 1960 there were four workers to pay for the pension of every retired person," he wrote. "In 2000 there were only two; in 2020 a single worker will have to subsidise the needs of each pensioner.

Pensions reform could be Raffarin's biggest challenge

"What that means is that if we do nothing today, in 20 years our pensions will be reduced by a half.

"Conceived more than 50 years ago, our retirement system no longer corresponds to the demographic reality."

But Bernard Thibault, secretary-general of the giant CGT union, said people would take to the streets to register their anger.

I have friends of 60, they ache all over, they're half dead - someone who starts work at 16 should be able to retire at 56

Jean-Marc Morato
French decorator

"The government would be wrong to believe that just because it is not politically in any danger it is protected from a large-scale social movement on pensions," he said.

Polls suggest that many French people accept the need for change, but some are angry that people are being forced to work longer.

"Forty years is enough, especially in a tiring job like mine," said Paris decorator Jean-Marc Morato.

"I have friends of 60, they ache all over, they're half dead. Someone who starts work at 16 should be able to retire at 56.

"First we had to pay in for 37-and-a-half years, then they changed it to 40. Soon they'll say 45 years."

Commentators say France is behind other nations in introducing public sector reforms.

They are moving in the right direction, but these are small steps

Monika Queisser
Pensions expert

"If 25 years after Britain, 15 years after Italy and 10 years after Spain, France finally started to cut back the public sphere, it would be a revolution," said Alexis Brezet, an analyst for the right-wing Le Figaro newspaper.

Others said the proposed reforms might not go far enough.

"They are behind other countries in Europe," said Monika Queisser, pensions expert at the Paris-based Organisation for Economic Co-operation and Development (OECD).

"They are moving in the right direction, but these are small steps."