French Prime Minister Élisabeth Borne called the government's plans presented on Tuesday, with which she intends to reform the statutory pension system, as a project of "balance", "justice" and "progress".

They are to go through the cabinet the week after next, then to parliament and come into force at the end of the summer.

Niklas Zaboji

Economic correspondent in Paris

  • Follow I follow

The reform contains two central points: Firstly, an increase in the statutory retirement age from the current 62 to 64 years, i.e. to a level that has long been customary in Germany and many other industrialized countries.

This increase is to be phased in gradually by 2030.

On the other hand, the government wants to increase the contribution period from 41.5 to 43 years much faster than previously planned, which must have been paid into the pension fund in order to receive full benefits – in 2027 instead of 2035.

The government justifies the need for reform with demographic change and the threat of billions in deficits in the pension funds, which are financed on a pay-as-you-go basis, as in Germany.

According to Borne, the system is in balance with the planned changes in 2030.

Finance Minister Bruno Le Maire reiterated this need.

"France has a pension system that is one of the most generous in the world," he said, speaking of "strength" and "pride" but calling it a "serious problem" without reforms to a deficit of 13.5 billion euros a year heading for 2030.

“Some claim that this sum is insignificant.

But for a country that has three trillion euros in debt, no deficit is irrelevant,” warned Le Maire.

"We will do everything"

The government is basing its concerns about cash deficits on calculations by the 40-strong Council of Experts, the Conseil d'Orientation des Retraites, which includes economists and parliamentarians as well as trade union representatives.

The committee did not make any explicit political recommendations and did not see the continued existence of the pension system in jeopardy.

But it did unequivocally forecast a deficit over the next 25 years – even if unemployment continues to fall and productivity increases.

Three adjustment screws could therefore be adjusted to ensure balanced funds: the salary, which is politically too sensitive to reduce, the contribution rates, which increase the non-wage labor costs, or the retirement age and contribution period.

There is no room to simplify the complicated French pension system of around 40 funds and to introduce a points system.

In this respect, the new plans differ from the reform plans planned during Macron's first term in office but buried at the beginning of the pandemic, which brought hundreds of thousands of demonstrators onto the streets.

Conflicts are programmed this time too: employee representatives unanimously reject raising the retirement age and have again announced protests.

"We will do everything we can to persuade the government to withdraw," said Laurent Berger, head of the more moderate CFDT union.

His proposal is: employers' pension contributions up and more older people in employment as contributors.

That would flush the necessary billions into the coffers to avert a structural deficit.

A "essential step"

Resistance also comes from the opposition.

And the French themselves didn't fare too well with the reform project either.

In the most recent survey by the Odoxa and Agipi institutes, 74 percent of those questioned were in favor of keeping the pension at 62.

Only 16 percent voted to raise the entry age to 64.

In recent months, the government has held talks to convince critics of its plan.

It is considered a concession to plan to retire at 64 instead of the retirement age announced by Macron during the election campaign.

The planned increase in the minimum pension from 980 to 1200 euros net is also intended to appease critics.

As before, those who started working at a young age should also be able to retire earlier without deductions.

The government also only wants to abolish special regulations for employees in state-owned companies for future cohorts.

For Monika Queisser, pensions specialist at the industrialized countries' organization OECD, the latter is nevertheless an "essential step".

"While these schemes don't affect very many retirees, they are still very expensive," she said on Tuesday.

France's statutory pension system is expensive and generous by global standards.

According to the OECD, its costs amounted to 13.4 percent of economic output.

In Germany it is significantly less at 10.4 percent.

If you look at the net replacement rate, on average a French person receives a significantly higher pension in relation to their salary than a German.

74 percent compared to 53 percent here, the OECD average is 62 percent.

Experts warn that the systems can only be compared one-to-one to a limited extent.

Because in countries like Germany or the Netherlands, the operational and funded pillars of old-age provision are stronger.

In addition, pension contributions are higher in France, the OECD puts the effective rate on average earnings at 27.8 percent - more than the 18.6 percent due in Germany, although this excludes cross-financing by the state.

With the length of retirement, France occupies a top position.

According to the OECD, men live here for an average of 23.5 years and women even 27.1 years as pensioners.

In Germany it is less, at 20.1 years for men and 23.1 years for women.

Less than 60 percent of the French in the 55 to 64 cohort work, compared to more than 70 percent in Germany.