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Why does Macron have so many problems with his pension reform?

Why does Macron have so many problems with his pension reform?

President Emmanuel Macron is facing the toughest challenge to his authority after his government bypassed the lower house to push through a deeply unpopular pension reform bill that would raise the retirement age. Here’s why:

What changes does Macron want to introduce in the pension system?

The law delays the retirement age by two years, up to 64 years. The change will be applied gradually, with the age increasing by three months each year starting in September, until 2030.

Some workers with jobs considered physically or mentally demanding will retain the right to retire earlier than the majority of the workforce.

Starting in 2027, most workers will have to contribute to Social Security for 43 years, instead of 42, to be able to collect a full pension. This was already provided for in a 2014 reform, but Macron is accelerating the pace of the transition.

By comparison, the United States is slowly raising its retirement age to 67, while Britain has announced plans to raise the state retirement age to 68 sometime between 2037 and 2039.

A protester at a traffic light holds a sign reading ‘Macron at the service of Black Rock, Black block at the service of the people’ during a demonstration at Place de la Concorde after the French government pushed a pension reform through parliament without vote. using article 49.3 of the constitution, in Paris on March 16, 2023. (Photo by Thomas SAMSON / AFP)

Why does the government say that a change is necessary?

The Macron government claims that the reform is necessary to keep the pension budget in the black. If no action is taken, the pension system would record an annual deficit of 13.5 billion euros by 2030, according to government forecasts.

The main measures will generate 17.7 billion euros of additional contributions by 2030. The government calculated that the “accompanying measures” to pave the way would cost 4.8 billion euros, creating a surplus of 300 million euros in 2030.

However, the additional changes raised this cost to 6,000 million euros, forcing the Government to look for new last-minute savings and additional contributions to balance the budget.

The French pension system costs almost 14% of GDP, the third highest in the OECD behind Italy and Greece.

Protesters hold banners reading
Protesters hold banners reading ‘No’ and ‘Macron, take your retirement, not ours’ during a demonstration a day after the French government pushed a pension reform through parliament without a vote, using article 49.3 of the constitution, in Rennes, western France. on March 17, 2023. (Photo by JEAN-FRANCOIS MONIER / AFP)

Why is pension reform such a delicate task in France?

The pension system is a cornerstone of the cherished French model of social protection.

It is based on a mandatory contributory pension scheme and solidarity between generations. In other words, the contributions of those who currently work directly finance the pensions of those who are now retiring.

Individuals can make voluntary contributions to savings products to complete their eventual pension through the state system, but there are no private pension funds like the usual ones in Great Britain and the United States.

Previous presidents, such as Nicolas Sarkozy and Jacques Chirac, met with fierce resistance from the unions and the street when they tried to change the pension system.

What will happen next?

Macron’s decision to pass the pension law without putting it to a vote has angered opponents and sparked pockets of violent riots.

The Government faces a motion of censure in Parliament. The motion is expected to fail, leaving the government to fight on, while the unions vow to keep up their battle.

If the motion of no confidence is unexpectedly approved, Prime Minister Elisabeth Borne would resign from her government in the following hours. Macron would have to form a new government without a majority in parliament and continue to rely on support from a deeply divided centre-right.

He could call a referendum on pension reform and risk turning it into a referendum on his presidency. Or he could dissolve Parliament and call early elections, a move that observers say would only further weaken him in the National Assembly.

Source: Reuters

Source: Gestion

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