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Pensions, in France the tug of war between Macron and the unions on the retirement age of 64 is getting tougher

Yesterday another massive day of protest in France against the reform desired by Macron to secure the social security system. The unions reject raising the retirement age to 64 but in Germany it is already 64 and in Italy even 67

Pensions, in France the tug of war between Macron and the unions on the retirement age of 64 is getting tougher

The storm of pensions shakes France violently. Yesterday, new massive day of protest against the pension reform in France. The ministry speaks of a million protesters but the unions claim 2,5 million for the fourth time in three weeks and promise an even tougher appointment for March 7th. While the struggle between the government and a part of the population is thus escalating, here are some keys to understanding the situation.  

Why a pension reform? 

The French pension system is a pay-as-you-go system. It works according to a logic of intergenerational solidarity: the working population directly subsidizes contemporary pensioners through contributions.  

Beginning in the mid-70s, like its European counterparts, the French system entered a period of turbulence. She found herself between the decline in contributions, caused by the slowdown in economic activity, and theincreased financial needs, due to the general aging of the population. Since the 90s, France embarked on a series of reforms, without however changing the essence of the system. 

These reforms have made it possible to limit the deficit without deleting it. The government department dedicated to monitoring the pension system, the COR, now estimates that the system is slightly, but structurally, in deficit. This means that the contributions of workers and companies are not sufficient to pay the pensions of retirees and that is a government grant is required. On the other hand, "the results of this report do not validate the rhetoric that advances the idea of ​​an uncontrolled dynamic of pension expenditure". 

What kind of reform? 

there three main options to address the deficit. The first is not to change the system and to remain in one logic of state support, as is currently the case. In fact, the deficit is under control and does not present any risk of embolism but implies an increasingly large cost for the tax payers. The second is that of a radical change of philosophy, with the transition to a capitalization system. This seems to be politically difficult, because the French are very attached to the pay-as-you-go system. Finally, there is the intermediate solution, that of a parametric adjustment of the existing system. In this case, three levers are available: the duration of the contribution, the level of pensions or the contribution rate with a consequent increase in the retirement age. 

It is the last option that the government has chosen, and more precisely the path of lengthening the contribution period. The reform aims to postpone the statutory retirement age dat 62 to 64 years old and to increase the number of years needed to receive a full pension 42 43 from in years. Let us not forget that the retirement age is already 64 in Germany and 67 in Italy.

Emmanuel Macron he therefore made a double political choice. The will to make a reform it can be explained by the concern for the credibility of the budget on the European scene and by the desire to maintain the image of a reformer. The type of levers chosen for this reform, ie the duration of workis obtained by elimination. Engaged in the logic of supply since the beginning of his first five-year term, the president refuses to raise taxes. Furthermore, since retirees form the electoral heart of the majority, this rules out a reduction in pensions. But the unions are solidly against the reform wanted by Macron.

Why this opposition? 

To understand the scope of the mobilization - we are talking about the largest mobilization movement of the last 30 years, in a country that does not lack them - we must first of all go back to the political context. Far from the wave of enthusiasm that characterized his first election, Emmanuel Macron is experiencing a complicated start to his second term. After winning against Marine Le Pen, he has lost an absolute majority in parliament and must therefore deal with the opposition. 

In the form, the reform is poorly understood by the French who do not understand the need for it. While the members of the majority repeat that it is necessary to "save the PAYG system", the various experts, including government ones, agree on the fact that this system is not in danger for now. In addition, certain segments of the population will be penalized by the reform, in particular women, as recognized by the Minister of Labour, O. Dussopt. 

In essence, observers agree that Government communication has been chaotic. The government changed records regularly and it took months to get a clear picture of the changes to come. Furthermore, it has failed to convince any reformist unions, and therefore suffers from the image of an executive that wants to impose itself by force. Finally, the transition from 62 to 64 years of age constitutes, also for its symbolic value, a point of crystallization of tensions.  

Why is arm wrestling likely to last? 

The government is currently caught between two fires. On the one hand, he pledged his political credibility to this reform. On the domestic scene, it is one of election campaign promises of Macron, who wants to maintain the image of a reformer. Externally, France has engaged with its European allies, while the government cannot afford a rating downgrade by the markets. 

On the other hand, i unions are in revolt against this reform, while the government no longer has an absolute majority in the Assembly. The executive is therefore seeking an alliance with the traditional right, whose support is not assured.  

Caught between its commitments and political reality, all in a highly inflamed social context, the government has several crucial weeks ahead of it.

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