FRANCE – The European Commission says France’s pension reform is “clearly to be welcomed” but says the risks of future imbalances cannot be ruled out.
The Commission acknowledged “a comprehensive reform” that will see the raising of contribution years, higher incentives to continue working and a change of public sector pension indexation from wages to prices.
“This reform is clearly to be welcomed, as France is now in a considerably better position to meet the budgetary costs of ageing population,” the Commission said in its assessment of France’s 2003 update of the stability programme.
“Despite this major improvement, risks of unbalances in the long term cannot be ruled out.”
It said the reform, plus other efforts, will bring the debt to gross domestic product ratio down for the next 15 years.
“But, once the impact of ageing intensifies, the debt to GDP ratio could go back to values around the Maastricht reference value.”
“A different pattern emerges if consolidation efforts do not materialise. Debt to GDP ratio would indeed follow an explosive path, the pension reform solely not ensuring long term sustainability.”
And the Commission warns that the economic policies in France’s submission “are not consistent” with its own so-called “Broad Economic Policy Guidelines”.
Economic and monetary affairs commissioner Pedro Solbes said that despite “insufficient” action the budget front, France’s pension reform was a positive move.
“Even if long-term sustainability of government finances is not ensured, France is now in a considerably better position to meet the budgetary costs of ageing population,” Solbes told a briefing in Brussels.