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France unveils budget plan to raise retirement age

Under the controversial plan, the age at which workers can retire with pension benefits would rise from 60 to 62 over the next eight years.

June 17, 2010|By Devorah Lauter, Special to The Times

Reporting from Paris —

The French government Wednesday unveiled a controversial plan to gradually raise the age at which workers can retire with pension benefits from 60 to 62 over the next eight years, whittling away the long retirements that are a coveted part of the country's way of life.

The government hopes the new measures, which still require the approval of Parliament, will eliminate the retirement system's nearly $40-billion deficit by 2018.

The announcement puts France in line with other European countries making unpopular budget cuts. Governments across the continent are struggling to control ballooning deficits worsened by the global economic crisis and to calm fears of resulting financial instability within the European Union.

Talk of retirement changes has sent unions protesting in the streets for years. But with the economic crisis limiting state spending, polls show that most of the French are braced for some sort of alterations so they can help pay for their children's retirement and reduce the nation's debt. That doesn't mean they are happy about it, or that they agree with the current proposal.

"We have to think of the younger generation," said Alain, 36, a police officer in Paris who could not give his full name because he is not authorized to speak to journalists while on duty.

Under the proposal, which may still face revisions, civil servants like Alain, who make up a major sector of the French economy, also will have to gradually pay higher social security fees.

"We have no choice but to work more, but it's still delicate," Alain said. "If we keep losing our privileges little by little, people will want to revolt."

A bloody-lipped caricature of Sarkozy dodging a punch from the Socialist Party leader Martine Aubry, who sported a swollen black eye, appeared Wednesday on the front page of the left-leaning daily Liberation. "Retirement: the Brawl Begins," was the headline.

The proposal, considered to be French President Nicolas Sarkozy's major gamble for reelection in 2012, was met by criticism from opponents to his party, who say retiring at 60 is a social right and charge that poor laborers will bear the brunt of expected changes.

"The end of retirement at 60 is the end of a world," Left Party leader Jean-Luc Melenchon said on France Info radio. "Today is a day of sadness and anger."

The next several months will determine whether unions can muster large public support to block the proposal, which Parliament will vote on in September. They have already announced a plan to protest on June 24.

Others think the measures will be implemented with relatively little hair-pulling.

"People aren't necessarily happy with the idea of reform, but the unions have lost a lot of popular support," said Gerard Cornilleau, an economic analyst at the Sciences Po university in Paris. "And since the reforms will take place gradually, it might not be the end of the world."

But the French are nevertheless used to leaving their jobs even earlier than age 60, and waiting six months to nearly two years on average to get their full benefit payments.

Eric Woerth, the labor minister in charge of delivering the thorny reform, hopes to convince the public that it "is gradual and fair," he told journalists. He said most European countries were doing the same.

The lengthening life expectancy and the growing cost of retirement mean that people will have to work longer, Woerth said.

The measures also include increasing the work requirement to get a pension from 41 to 41.5 years. And they raise taxes on the wealthy by 1%.

Retirement age will increase by increments of four months per year, starting with people born in 1951. Workers with physically harmful jobs will be able to retire at the current limit.

Part of the plan to reach a balanced budget by 2018 depends on job growth. However, some economists fear that spending cuts made across Europe, at a relatively rapid pace, could end up slowing the economic growth needed to balance those budgets.

"It's a vicious circle," said Cornilleau. "The markets might think that these measures are too rigid and that they are coming too quickly," further decreasing the value of the euro.

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