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France

French pension reform asks workers, firms to pay more

Text by FRANCE 24

Latest update : 2013-08-27

A proposal to reform the French pension system revealed Tuesday would increase worker and company contributions proportionally beginning in 2014 and raise to 43 the number of years an individual must pay into the system to receive full benefits.

France’s Socialist government unveiled a major effort to reform its debt-ridden pension system on Tuesday by increasing worker and company contributions, and gradually lengthening the period for paying in.

Prime Minister Jean-Marc Ayrault, who agreed the final proposal in two days of talks with trade unions and employers, said the reform would aim to share out the burden of paying for the increase in life expectancy.

“The reform that I’m proposing aims to fix the accounts in a lasting way while also removing sources of injustice,” he said.

Under pressure from the European Commission, France is looking to plug holes that will see its generous state pension scheme fall more than 20 billion euros into the red by 2020.

But pension reforms are highly contentious in France -- with previous efforts in 1995 and 2010 sparking mass protests and damaging strikes -- and this latest effort could be the biggest test yet for President François Hollande’s government.

The government proposes that employees as well as businesses pay more every month to France’s retirement system – mostly through a 0.15% increase in both workers’ and employers’ contributions next year.

The plan also incrementally raises a French worker’s contribution period from the current 41.5 years to 43 years by 2035.

A levy on some bonus payments to wealthier pensioners and a change in the date when pensions are adjusted for inflation each year are due to generate some savings.

The government said the measures would save the state’s strained retirement system 7.3 billion euros by 2020, with the books balanced by 2040.

However, the reform will stop short of trimming annual increases that adjust pensions for inflation and avoid some other money-saving measures proposed by a panel of experts earlier this year.

'Only about raising taxes'

France’s leading trade unions were divided on the reform proposal. The CFDT union has acknowledged “even and moderate efforts required” under the plan, and welcomed extended rights to early retirement or retraining for workers in physically demanding jobs.

The more vocal CGT union said the proposal was “directed against young people” and is calling for strikes and protests on September 10.

CGT regarded the new plan as the continuation of reform policies initiated under former conservative president Nicolas Sarkozy.

But the head of his UMP party, Jean-François Copé, criticised the proposal. “This is only about raising taxes. Those charges will diminish the purchasing power of the French who are working and businesses’ competitiveness. That is the opposite of a courageous reform,” he said.

The main business federation MEDEF, too, cautioned against raising employers’ contributions any further and added: “The measures announced this evening by the Prime Minister amount to giving up on solving the pensions issue in a sustainable way through true reform”.

The government, already under fire from the business sector over high labour costs, aims to soothe the pain for companies by passing a parallel measure to lower the social charges that employers pay on salaries.

Date created : 2013-08-27

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