France lagging 'far behind' European counterparts on pensions reform
16 Nov 2012
FRANCE – France remains "far behind" its European counterparts when it comes to implementing long-term, sustainable pensions reform, and the current economic environment will "inexorably" lead to the failure of the country's social system, pensions experts have claimed.
Addressing a pensions forum in Bordeaux today, Jean-Michel Charpin, economist and general inspector of finance, pointed out that international organisations such as the IMF and the European Union had been vocal critics of the reforms implemented in France since 1992.
According to him, the criticisms centred on the fact that French governments have continually failed to launch a real capitalisation system, in spite of the creation of the PERCO plan in 2003.
PERCO plans – launched via the 'Fillon law' in to encourage workers and companies to use a capitalisation system to complement the traditional system of pension distributions – receive payments based on an employee's desire to save.
But the real issue, according to Charpin, remains the "impossibility" of French governments implementing pensions reform over the long term.
"The last pension reform introduced in 2010 sought to set up a sustainable financing plan for the pay-as-you-go system until 2020, but only with a few measures such as pushing up the legal retirement age and increasing the length of contributions – this is clearly not enough," he said.
"But if we decided to extend this reform until 2030-35, we would certainly need to engage in long discussions with social partners, and I'm unconvinced they're willing to do so – otherwise, they would have already done it."
However, Raphael Hadas-Lebel, president of the Conseil d'Orientation des Retraites (COR), welcomed the agreements reached with social partners in the recent past, which he said acknowledged France's demographic issues and the link between employment and retirement.
But he also conceded that social partners did not see eye to eye on the best tools and measures for implementing a financial plan for the first pillar.
Raymond Soubie, who had been an adviser to Nicolas Sarkozy, said that when the former president introduced the 2010 reform, his goal had been to refinance the deficit of the first pillar and find a sustainable financial plan for the next 10 years.
"These measures already elicited strong opposition in 2009-10, so I don't even want to think about what would have happened if Sarkozy had proposed the reform over a longer period," he said.
"One thing is certain, however. Given the current economic environment, and if we base our economic growth expectations on a relatively low rate of between 0-1.5% over the next two years, the French social model will seriously be at risk in future.
"The next government and the social partners will have no other option but to redesign the French pension system completely."
Anne Marie Guillemard, professor of sociology at the university of Paris-Sorbonne and a specialist in pension systems, added that while the previous government had promised to reach a salary 'progression rate' of 50% with the 2010 pension reform, the current rate was only approximately 40%.
"In comparison," she said, "other European countries such as the Netherlands have reached a 84% progression rate thanks to their previous reforms, while Finland has a 61% rate and Germany a 58% rate."
Author: Cécile Sourbès