Plan to Tame French Pension Shortfall Has Few Admirers

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PARIS -- The government's much-anticipated proposal to change the generous but underfunded French pension system has been to the liking of very few here, with many critics on Wednesday calling it insufficient and others worried that it may herald a broader unraveling of the country's cherished system of social protections. Nor are France's European partners likely to view the plans as representing the sort of structural reform they have called for.

The changes will involve slight tax increases on workers and companies and an eventual increase in the required pay-in time to 43 years from 41.5, an approach presented Tuesday by Prime Minister Jean-Marc Ayrault as "responsible," "just" and "balanced." Retirement payments will not be reduced, and the deficit of the country's private sector pension system, which is currently underfunded by about $12 billion, will be all but erased by 2020, according to government projections.

For all the frustration or worry over the plan, however, it appears to have left no one enraged. It is a tentative middle way in keeping with President François Hollande's careful, check-the-boxes style of governing and his gradual approach to economic recovery.

"Everything's being done in homeopathic doses," said Jean-Paul Fitoussi, a professor of economics at the Institut d'Études Politiques in Paris. "It won't please anyone. But one also has to say that it won't really displease anyone, either."

Detractors said the plan was unlikely to right the finances of the broader pension system, which is currently projected to run a total deficit of about $28 billion in 2020, approximately 1 percent of G.D.P. Nor, they noted, would it do much in the near term to reduce the country's budget deficit, which Mr. Hollande has pledged to bring to 3 percent of G.D.P. by 2015, down from 4.8 percent last year.

The legislative proposal will go before the Parliament, where the left holds majorities in both chambers, this fall.

European officials, investors and economists have called upon France's government to make structural reforms, trim public spending and halt tax increases to avoid stifling the beginnings of a return to growth in the country's stagnant economy. All have urged an overhaul of the pension system, which has changed little in recent decades despite a significant rise in life expectancy.

But pension reform has been an explosively contentious matter in the past. With unemployment high, at 11 percent, and with little prospect for significant growth in the near term, the government has been eager to avoid controversy.

"The French are attached to their pension system -- but, how could they not be?" Mr. Ayrault said Tuesday. "This beautiful inheritance, we have a duty to preserve it."

The country's European partners and the International Monetary Fund are sure to feel that France has not gone far enough, Mr. Fitoussi said. In France, where the right to a comfortable retirement is widely cherished, many saw Mr. Ayrault's words as a paean to an untenable status quo.

There is every indication "that this reform will not be the last one," wrote Le Monde, the left-leaning daily that is considered the country's newspaper of record. The government's proposals bear only on the financing of pensions for workers in the private sector, not those in the sprawling public administration or other complementary retirement plans, Le Monde noted.

"Grave problems are being, once again, obscured," the newspaper said. "To confront them seriously, one will need more than skill: daring."

Amid mass protests and opposition from the Socialist party, Mr. Hollande's predecessor, Nicolas Sarkozy, pushed through his own pension changes in 2010, raising the minimum retirement age to 62 from 60. Mr. Sarkozy's allies on the right have called the current government's pension proposal unserious.

Jean-François Copé, who heads Mr. Sarkozy's Union for a Popular Movement party, said in a televised interview that the government has announced "no pension reform but simply a rise in taxes."

"The heralded grand reform, which was supposed to thrill the whole of Europe, has quite simply gone down the drain," wrote Gaëtan de Capèle, economics editor of the newspaper Le Figaro, a rightist bastion that can be safely relied upon to rail against Mr. Hollande's policies.

Leftists, too, have spoken unfavorably of the government's plans. Though pleased at the creation of a points system offering credits that would allow some workers in physically taxing or dangerous occupations to retire earlier, for instance, labor unions and some politicians have expressed concerns that the changes -- undertaken by a government of the left -- may signal some willingness to break with the social protection policies that are symbols on the left.

Several of the country's small but politically potent trade unions, worried that the plan would effectively push up the retirement age, have called for a national day of protest on Sept. 10.

The average retirement age for private sector workers is currently 62, several aides to Mr. Ayrault said Wednesday. By 2035, at which point all workers would be required to pay into the system for 43 years in order to receive a full pension, the average age is expected to have risen to 64.5, they said.

world

This article originally appeared in The New York Times.


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