Newly-elected French president, Francois Hollande, is campaigning to secure a Socialist Party majority in the National Assembly in the June 16 and 17 elections. To this end, he has followed up on an election pledge by proposing a reduction in the retirement age from 62 to 60 years for thousands of French workers.
This proposal, if enacted, will reverse one of the most important structural reforms enacted by the government of President Nicolas Sarkozy in 2010 as a means of providing long-term fiscal sustainability for France’s state pension system. Hollande’s proposal runs counter to almost every reform suggestion elsewhere in Europe and in the United States in response to the increasing life expectancies and increasing size of the senior citizen population.
President Hollande’s proposal would restore the retirement age to 60 for individuals who have contributed to the pension system for 41 years. Mothers with three or more children would also be able to retire at 60, as would the elderly unemployed. Proposals to lower the pension age for other categories of workers are said to be under consideration. The first step alone will cost E1.1 billion in 2013, rising to E3 billion a year by 2017.
The government proposes to cover the expense by raising payroll taxes for employers and employees. The negative consequences of such a tax hike for the labor market are self-evident.
President Hollande’s proposal runs directly counter to a call last week by the European Commission for France to rein in public spending and to enact structural reforms to tackle its serious public debt burden. The proposal is part of a total of E20 billion in new spending promised by Francois Hollande during his own election campaign. The President already confronts the challenge of finding E100 billion in savings to reduce the budget deficit to 3 per cent of gross domestic product in 2013, and to zero in 2017.
If the Socialists win the upcoming National Assembly elections, France predictably will not meet those fiscal targets. By 2017, there will be no euro-zone, and there may not even be an E.U. if voters across continental Europe – other than Germany – continue to ignore the reality of fiscal constraints.
Tags: Hollande implements election pledge, weakens french labor market, worsens French debt problem
Charles Rowley's Blog 
June 8, 2012 at 9:28 am |
[…] If the following is true, then the Eurozone is doomed: President Hollande’s proposal would restore the retirement age to 60 for individuals who have contributed to the pension system for 41 years. Mothers with three or more children would also be able to retire at 60, as would the elderly unemployed. Proposals to lower the pension age for other categories of workers are said to be under consideration. The first step alone will cost E1.1 billion in 2013, rising to E3 billion a year by 2017. […]