FRANCE’S GOVERNMENT will unveil its planned reform of the pensions system tomorrow, looking to convince investors it is serious about adjusting state finances while hoping to avoid war with unions.
It is likely to be the last piece of major economic legislation that President Nicolas Sarkozy oversees before his re-election bid in 2012, and much is riding on it.
Analysts are increasingly concerned about French public finances, with the deficit expected to set new highs in 2010 and rumours spasmodically jolting the market that France’s prized “AAA” sovereign debt rating might be in jeopardy.
“In the context of worries about long-term debt trajectories this reform is extremely important. What comes out of it could be very meaningful for French finances,” said Jacques Cailloux, chief European economist at RBS in London.
The economy ministry says the pay-as-you-go pension system will register a €32 billion deficit in 2010. This is set to rise above €100 billion a year by 2050 barring reform.
At present, French employees can claim a full pension at 60 if they have worked at least 40.5 years – one of the youngest retirement ages in the developed world.
France’s unions have rejected the proposed hike in the retirement age, and are instead calling for more taxes on the rich and on capital income. Five of the state’s six big labour movements have called for protests against the reform. – (Reuters)
