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Pensions worsen France's deficit

FRANCE - France’s plans to significantly reduce its social security deficit for 2006 will not be reached, latest figures show, due to an increase in the cost of state pensions.

The total deficit for France’s social security regime should reach €10.3bn euros this year, €1.4bn euros more than the government’s objective but €1.3bn euros less than the level in 2005.

Although the cost of health care was relatively stable, with the deficit reduced to €6.3bn euros against last year’s €8bn, the cost of paying for France’s growing population of elderly was higher than expected.

Critics say the government was simply too ambitious in its plans to reduce the heavy burden of its social commitments. Last autumn the government promised to reduce its deficit by a quarter. This would have seen an improvement in the deficit from €11.6bn to just €8.9bn.

However, paying for those in old age turned out to be much more expensive than forecast. Instead of reducing its 2005 deficit of €1.9bn in this category to €1.4bn as planned, the deficit actually worsened to €2.2bn euros.

The first generation of baby boomers, born in 1946, should reach 60 this year, signalling a major headache for France’s future social security costs. Currently health insurance makes up around 60 percent of social security costs but this could be overtaken by pension-related costs in the future.

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