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Macron says France's pension reform cannot go ahead as planned

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Elderly people sit on a bench to take in the sun with their dog along the Promenade Des Anglais in Nice February 19, 2013. REUTERS/Eric Gaillard

PARIS, June 3 (Reuters) - French President Emmanuel Macron acknowledged on Thursday that his planned pension reforms cannot go ahead as planned in the wake of the COVID-19 crisis, retreating on one of the signature measures he promised when he came to office.

Macron's revamp of France's costly pension system, central to his drive for a more flexible and competitive labour market, infuriated trade unions, prompted weeks of transport strikes and was later shelved when the pandemic hit the economy.

"I do not think that the reform as it was originally envisaged can go ahead as such," Macron told reporters.

"It was very ambitious and extremely complex and that is why it generated anxiety, we must admit that. Doing it right now would mean ignoring that there are already a lot of worries."

The reform of France's byzantine pension system,which costs the government 14% of economic output, was one of Macron's key campaign promises before his election in 2017.

With new presidential elections due in Spring 2022, Macron has to decide whether to risk pushing ahead with the polarising reform, or make a bid for re-election with a new plan.

He has already made some concessions to the unions. Any further diluting of the reform, or deferring it until after the 2022 vote, might defuse union and voter concerns, but risks undermining his credentials as an economic reformer.

The reform plan included raising the retirement age by two years to 64, replacing dozens of sector-specific regimes with a universal, points-based system and doing away with some legacy regimes in the state railways, utilities and other industries where some workers are entitled to retire on a full pension years before the average retirement age of 62.

PUBLIC FINANCES

The president said he would look at the health of the economic recovery and soundness of the country's public finances before making a final decision, which he has said he will do by the summer.

He also linked the need to curb the cost of pensions to a separate reform plan that would see the state increase benefits for the elderly in need of care.

France could not pay more to look after the elderly in their own homes "if we have not succeeded in bringing more serenity to our finances, and without raising taxes. There is for me a link to the question of pension reform," Macron said.

Trade unions reacted to Macron's remarks with caution.

Catherine Perret of the hard left CGT union, who was involved in negotiations with the government, told Reuters she worried the government might try to merge parts of the pension reform with the reform of benefits for the elderly.

Frederic Seve, a negotiator with the reform-minded CFDT union, said he was encouraged Macron had put an onus on cementing an economic rebound. The president would be taking a gamble if rushed through the reform ahead of next year's vote, he continued.

"It wouldn't be good for him to unleash unrest over pensions in the autumn," Seve said.

Reporting by GV De Clercq; Editing by Alison Williams

Our Standards: The Thomson Reuters Trust Principles.

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