FRANCE – France will have to spend up to 1% of its GDP to finance the public pension system if no further reforms are implemented, a new report has found.
According to the Conseil d'Orientation des Retraites (COR) – which monitors the French retirement system and makes public policy recommendations – the funding needs for the public pension system alone will jump from €14bn to €21.3bn between 2011 and 2017 if the government fails to take action.
The COR went on to say that France would have to spend as much as 1% of GDP to finance the public pension system.
For its latest report, the COR revised the economic forecasts it previously published and which served as the foundation for the 2010 reform of the French pensions system.
The COR based its new research on a fertility rate of 1.95 per woman, a migratory rate of +100,000 per annum and a life expectancy gain of two trimesters every two years after 60 years of age.
Additionally, the monitoring group established three different economic scenarios for the coming years.
While the first scenario plans an unemployment rate of -4.5% and an annual progression in labour productivity of 1.5%, the second and third scenarios are more conservative, with an unemployment rate of 4.5% and 7% respectively, and an annual progression in labour productivity of 1.5% and 1.3%.
The COR concluded that France would only manage to refinance and find a sustainable financial plan for the first pillar between 2024 and 2031, as opposed to 2018 as previously expected.
Speaking at a pensions forum in Bordeaux at the end of last year, Raymond Soubie, adviser to former French president Nicolas Sarkozy, was highly critical of the data published previously by the COR.
He said at the time that the organisation's forecasts for the government had been "far too optimistic" with respect to the unemployment rate, and had failed to consider any "pessimistic" scenarios.
"It seems today impossible to refinance and find a sustainable financial plan for the first pillar before 2018, as was originally planned when the government led by former prime minister Francois Fillon launched the 2010 reform," he added.
"This was due to the unrealistic projections made by the COR."