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The Battle for French Pension Reform

In a country with 42 different pension schemes and deep-seated stakes in maintaining the status quo, it is no surprise that a proposed overhaul of the French retirement system would be met with strong public resistance. And yet, reform is both necessary and inevitable, given France's demographic realities.

PARIS – A year after a proposed fuel tax triggered the gilets jaunes (yellow vest) protests, France faces another crisis, this time over pension reform. Mass demonstrations have now gone on for more than 50 days, not letting up even for Christmas and New Year’s Eve. Strikes have disrupted the operations of both the French National Railway Company (SNCF) and the RATP bus and subway network, leading to more than €1 billion ($1.1 billion) in losses for those companies. The strike in the transportation system has now ended, but the confrontation is far from over.

French President Emmanuel Macron’s proposed pension reforms are both far-reaching and needed. Under the current mandatory-pension system, the accounting schemes for determining benefits are all over the map, differing substantially by sector and occupation. The system is the outcome of a long-going historical process aimed at extending social protections in old age, based on the prevailing principles of the immediate post-World War II era.

The Macron government’s proposals are bold. But they are not intended to disrupt pay-as-you-go schemes, nor do they undermine the broader principle of intergenerational solidarity. The total pension payments for a given year will still be financed by social-security contributions from active workers’ earnings in the same year. The legal minimum retirement age of 62, most recently set in 2010, will remain for now. And the new system will still cost around 14% of GDP (which is much higher than in most other European countries).