France moves to tackle contentious pensions overhaul

14th June 2013, Comments 0 comments

France's Socialist government launched a major effort to reform its debt-ridden pension system on Friday, with a report outlining tough measures that are likely to face fierce opposition.

Under pressure from Brussels, France is looking to plug holes that will see its generous state pension scheme fall more than 20 billion euros ($27 billion) 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 the effort is likely to be the biggest test yet for President Francois Hollande's government.

The government is set to hold talks on the reforms later this month with employers and unions, who have already threatened strike action if they consider that the measures go too far.

Prime Minister Jean-Marc Ayrault said the government would present a reform plan by the end of the summer, which would then be put to parliament.

"Efforts will need to be made, but these efforts will not be crippling, they will be guided by continuity and justice," he said after receiving the report.

The expert report recommends measures aimed at saving seven billion euros within the system, including increasing the number of working years required to be eligible to receive full pension payments.

It calls for raising that number from 41.5 years to 43 years for those born between 1962 and 1966 and to 44 years for those born later.

It also recommends increasing pension contributions by 0.1 percent per year over four years, with the costs shared between workers and employers.

Some income tax benefits would also be reduced for pensioners and in some cases payments would no longer be indexed with the exact rate of inflation.

Ayrault noted that France, which has one of the highest birthrates in Europe, is not facing the same long-term pensions crisis as some other developed economies.

French officials have said the system's current financing problems are related to the significant number of baby-boomers retiring and should be resolved within 20 years.

The European Commission late last month urged recession-hit France to reform the pension system as it agreed to give Paris an extra two years to hit the EU-mandated deficit target of three percent of GDP.

© 2013 AFP

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