Pension challenge

French President Nicolas Sarkozy decided to make pension reform the main issue at his country's third "Social Summit" on Monday. He and members of his government met with representatives of the unions and employers for what were expected to be difficult talks.

Sarkozy said at the end of the meeting that the government would present its proposals in September. "If we want to save our pension system, we can't put off the decisions," he said.

Sarkozy's office had been at pains to lower expectations ahead of the event, saying that no decisions would be made on fundamental issues, but that the meeting would discuss "the timetable and the methods of work." The government said it didn't want to rush things, but "everyone knows the solutions by heart."

During the meeting, Sarkozy was reported to have added that the government did not intend to force a solution.

Pension reform is a highly controversial issue. The Budget Ministry estimates that the pension system will have a 10.7 billion euro ($15.13 billion) deficit this year out of a total public deficit of 25 billion. The labor minister, Xavier Darcos, told Reuters news agency that the growing proportion of elderly people in French society would mean that the cost of the pension system would drive the annual public deficit up to 100 billion euros by 2050.

Longer working life

The government would like to solve the problem by raising the retirement age, which, at 60, is unusually low compared with the rest of Europe, where many countries are moving towards 67. France has already taken some action in this direction, by increasing to 41 the numbers of years in which contributions have to be paid in order to earn a full pension. This means that people with degrees or elaborate training, who start work later, cannot expect to have contributed for 41 years by the time they're 60, while unqualified workers are more likely to have done so.

The unions are deeply opposed to any reform. Bernard Thibault, head of the CGT union, rejected the government's figures. "We will defend the right to retire at 60," he said. He also rejected the idea that "because life expectancy is increasing, it is unavoidable that people should spend a larger part of their lives working."

The government enters these negotiations at a difficult time. It had hoped to put off this third reform of the pension system in seven years until after the presidential election in 2012, but the economic crisis has intervened. Increased unemployment has led to a reduction in contributions to the system. In addition, the French government needs to do something about its expected deficit of 8.2 percent of Gross Domestic Product this year, caused by its attempts to boost the economy.

The government is not trusted

But the voters do not trust the government to deal with the pension crisis. In a survey conducted for the Metro newspaper, only 21 percent said they trusted the government to rescue the pension system, while 69 percent said they trusted the workers themselves or their unions. In another survey, well over half opposed either increasing the pension age or increasing the number of contribution years required for a full pension. But yet another survey shows that young people still at school or in training do indeed expect to work beyond their 60th birthday.

The government was anxious not to cause uproar. Labor Minister Darcos said that contribution rates should not go up. President Sarkozy said that pension levels should not go down. That leaves only the retirement age to play with if France is to deal with its pension challenge.

Author: Michael Lawton
Editor: Nancy Isenson