September 2, 2019 / 12:26 PM / 22 days ago

Macron's reform drive faces high-risk pension overhaul

PARIS (Reuters) - President Emmanuel Macron embarks this week on the next - and likely most perilous - leg of his reform drive by launching talks with unions on an overhaul of France’s convoluted pension system to plug a chronic deficit.

FILE PHOTO: French President Emmanuel Macron delivers a speech during the annual French ambassadors conference at the Elysee Palace in Paris, France August 27, 2019. Yoan Valat/Pool via REUTERS

The potentially explosive reform is looming large over the annual “rentree”, or return to business after the summer break, when the political agenda and tone is set for the coming months.

Macron returns to his domestic agenda a week after hosting a summit of G7 leaders where bonhomie papered over trans-Atlantic divisions, the French leader casting himself as a central figure in world diplomacy and a unifying champion of multilateralism.

Domestically, Macron withstood weekly “yellow vest” anti-government protests that petered out four months ago, but he is mindful of simmering public anger over his reform agenda and eager to avoid further violence on French streets.

The talks on Thursday and Friday with uneasy union leaders and Prime Minister Philippe Edouard kick off wide-ranging consultations with various professions like teachers and nurses on what could be a defining reform of Macron’s presidency.

“The government and myself are totally determined,” Philippe told reporters on Friday. “We’ve got a few months to make it happen, to come up with and draft this project.”

Unions have criticized Macron for turning a deaf ear to him as he lost little time early in his presidency pushing through a labor law reform and easing taxes for investors. They are also furious that he ignored their input for a much delayed unemployment insurance reform presented in June.

Pension reforms by conservative former presidents Nicolas Sarkozy in 2010 and Jacques Chirac in 1995 ignited street protests and failed to plug repeated deficits, which Macron’s government wants to wipe out by 2025.

In France private pensions schemes are rare, which means that nearly everyone pays into a public system, albeit through 42 different contribution and benefit schemes that Macron wants to replace with a single points-based scheme.

An Ifop poll for weekend newspaper JDD found that two-thirds of those surveyed did not have confidence in Macron’s government to overhaul the pension system.

“After the difficult times earlier in 2019, the symbolic importance of this (pension overhaul) will be whether the government and the president can keep reforming France,” said Bruno Jeanbart, head of political studies at pollster OpinionWay.

RETIREMENT AGE

Though numerous pitfalls lie ahead, the age at which a person can start drawing a full pension is shaping up to be the main point of contention.

Despite the fact that people are living longer than ever, polls suggest the French remain stubbornly attached to the current retirement age of 62, one of the lowest among OECD countries.

A special government adviser on pension reform proposed in July that the age to receive a full pension should be put back to 64, although they could retire from 62 albeit with lower pension benefits.

After unions rejected the suggestion over the summer, Macron said last week he preferred to focus on the duration of a person’s career in order to receive pension benefits, rather than the age they retire.

Critics say this would punish those who start their careers in their mid 20s after long studies, a problem that Macron has said he is keen to find a solution for. Economists say people will need to pay into the system one way or another to put it on sounder financial footing.

Macron’s move was cautiously welcomed by France’s biggest union, the centrist CFDT, whose support for the reform would give the government a big boost.

“There’s the method and then there’s the deeds. We’re hearing in this rentree a change of method - all the better, but what matters is that the deeds stack up,” CFDT head Laurent Berger told France Inter radio Monday.

Slideshow (3 Images)

Other unions like the hardline left-wing CGT - which has already promised demonstrations against the reform and threatened strikes - remain up in arms.

Dismissing Macron’s gesture as “blowing smoke”, CGT head Philippe Martinez said the president “is taking us for idiots”.

The MEDEF employers federation, however, says it cannot back a reform that does not push back the retirement age, the only way it says to whittle down the pension deficit.

Reporting by Leigh Thomas; Editing by Richard Lough and Mark Heinrich

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