Pension reform in France is ‘enough for several years’

Health and Social Affairs Minister Marisol Touraine, whose pension law is set to go to parliament in October, said that while the plan may appear less bold than a 2010 move under conservative Nicolas Sarkozy to raise the retirement age from 60 to 62, the Socialist reform would be a lasting one.

The overhaul would gradually extend the mandatory pay-in period from 41.5 years to 43 by 2035 and requires workers, retirees and employers to fill in an annual deficit set otherwise to reach 20 billion euros ($26bn) in 2020.

Analysts say the planned reform, the most closely watched of President Francois Hollande’s 15 months in office, does not go far enough because it only slightly accelerates a lengthening in the pay-in period that is already in place.

The European Commission, which recommended tougher measures such as trimming inflation-linked annual pension rises, sounded a note of disappointment when the draft reform was unveiled last week and said it needed to evaluate it in detail.

But crucially, Touraine says, a steering committee would revise the pension system annually and make recommendations to the government if a shortfall in contributions caused by slow growth or a rise in unemployment needed addressing.

“This is not a stopgap reform. It puts in place measures that are destined to last,” Touraine said.

“I’m not going to say it’s the last reform. Who can say what will be necessary in 2035 or 2040? I am just saying that we are doing what’s needed to get through the coming years.”

Hollande has used modest, step-by-step reforms to try to bolster France’s flagging competitiveness. While his pace of action has disappointed critics, government advisers say that going gently has so far ensured minimal opposition in parliament and on the street.

In contrast, Sarkozy’s hike in the retirement age sparked weeks of large-scale street protests and fuel strikes.

“An acceptable reform is one that is not brutal,” Touraine said. “We are not doing this to satisfy the demands of Brussels, we’re doing it to reassure the French people.”

The European Commission has given France an extra two years to bring its public deficit below an EU ceiling of 3 per cent of economic output.