The French government presents new plans to modernize the pension system. Analysts expect backlash from some workers.
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French President Emmanuel Macron is doing it again: a new pension reform will be presented on Tuesday, and should face some negative reactions.
Macron is in his second term as president of France, but overhauling the pension system is a long-held promise dating back to his first election in 2017.
The legal retirement age in France is currently 62, which is lower than in many developed markets, including much of Europe and the United States. The public sector also has “special schemes” or sectoral agreements that allow workers to retire before age 62.
At the end of 2019, the Macron government proposed a unique, points-based system that allowed a person to retire once they had earned a certain number of points. The idea was to harmonize rules between sectors.
But the plan met with an uproar. Public sector workers – arguably those with the most to lose from potential reforms – protested for several days in some of the country’s biggest strikes in decades. Amid such opposition and the coronavirus pandemic, Macron decided in early 2020 to put plans on hold.
There was talk of revisiting the plans in early 2022, but that was deemed too close to the presidential election, which took place in April last year.
“This year will be the year of pension reform, aimed at balancing our system in the years and decades to come,” Macron said during his New Year speech.
“As I promised you, this year will be the year of a pension reform, which aims to ensure the balance of our system for the years and decades to come.”
He added that he wanted to conclude the negotiations in time for new rules to apply from the end of summer 2023.
“There will be disturbances, there will be strikes, [but Macron] decided to move quickly: the current procedure is supposed to last no more than 90 days,” Renaud Foucart, a lecturer in economics at Lancaster University, told CNBC’s “Squawk Box Europe” Tuesday morning.
“Quick and dirty maybe, but much more likely to pass than five years ago,” he added.
Étienne Ollion, a sociology professor at Ecole Polytechnique, told CNBC Street Signs on Tuesday that Macron “wants to keep the image of a reformist president.”
His first term was dominated by key reforms, touching on topics such as labor law and taxation.
What to expect
One of the main issues will be the new retirement age. In the past, Macron has suggested this could be increased from 62 to 65, but at a gradual pace with increases of around 4 months per year until 2031.
French media have reported that the government is considering increasing the amount of the lowest pensions to make the transition to a longer working life more palatable to the public. CNBC could not independently verify this information.
Macron’s first proposal, from 2019, also considered tackling so-called “special regimes”.
Any further changes to these agreements are likely to result in negative reactions from the industries involved.
The relatively low retirement age in France weighs on its public finances. The country’s pension advisory council has reportedly estimated a pension system deficit of around 10 billion euros ($10.73 billion) each year between 2022 and 2032.