France to unveil make-or-break pensions reform

16th June 2010, Comments 0 comments

The French government on Wednesday will unveil its plan for a sweeping overhaul of pensions, hoping to plug a gaping hole in its public finances and avoid a long-running clash with unions.

Reforming the country's pension system is shaping up as the centerpiece of President Nicolas Sarkozy's reform agenda as he winds up his term in office and heads for a re-election fight in 2012.

After a final round of talks with Sarkozy late Tuesday, Labour Minister Eric Woerth will on Wednesday morning present the main points of the draft legislation on pensions reform that will go to the cabinet next month and to parliament in September.

The bill is expected to raise the legal retirement age to 62 or 63 from its current 60 and extend the period of contributions to social security to 41.5 years in 2020 from 40.5 years.

The French economic daily Les Echos reported late Tuesday that the government had decided to raise the retirement age to 62 years by 2018.

Talk of raising the retirement age has been taboo in France where the right to a pension from age 60 has been enshrined since 1982, a legacy of Socialist president Francois Mitterrand's administration.

The bill could however be revamped along the way as France's unions have vowed to fight the legislation with strikes and street protests, a tactic that has forced governments to back down in the past.

On Tuesday, tens of thousands of people demonstrated in Paris at the call of the union Force Ouvriere, which has taken a hard line in opposing the pensions shakeup.

Six other unions have called a nationwide strike for June 24.

"Yes a strike is necessary," union leader Jean-Claude Mailly told protesters in Paris on Tuesday. "Strike we can, my dear comrades."

So far, the right-wing government has signalled that it is not too worried about social unrest as polls show a majority of the French are mostly concerned about ensuring that the pensions scheme stays afloat.

French unions and the Socialist opposition have said the government must find new sources of pension financing by taxing the rich and businesses.

Like many other European countries, France is facing a funding shortfall in its pension scheme due to a growing older population and fewer working-age people paying contributions.

This year, the deficit in the pensions system is on track to reach nearly 11 billion euros (15 billion dollars) and Prime Minister Francois Fillon has said the shortfall could reach 100 billion euros in 2050.

French workers on average retire at a younger age than most of their counterparts in Europe.

The government's roll-out of its pension reform comes just days after it announced spending cuts worth 45 billion euros over the next three years, joining the belt-tightening movement sweeping Europe.

The debt crisis in Greece has served as a type of wakeup call over government spending after European countries that share the euro currency were forced to come up with a multi-billion-euro rescue package for Athens.

After a record deficit of 8.0 percent of GDP this year, the government is aiming to reduce the deficit to 6.0 percent by 2011, 4.6 percent in 2012 and 3.0 percent in 2013.

© 2010 AFP

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