The French government presented a new plan to update the pension system. Analysts expect some backlash from some workers.
Nurphoto Nurphoto Getty Images
French President Emmanuel Macron is going again: the new pension reform will be presented on Tuesday, and it is expected to face some reactions.
Macron is serving a second term as France’s president but overhauling the pension system has been a longstanding promise since he was first elected in 2017.
France’s legal retirement age is now 62 – lower than many developed markets, including much of Europe and the US.
At the end of 2019, Macron’s government proposed a single points-based system, which would allow people to retire after earning a certain number of points. The idea is to harmonize rules between sectors.
But the plan was met with an uproar. Public sector workers – perhaps the biggest losers from potential reforms – protested for days in some of the country’s biggest strikes in decades. Amid strong opposition and the coronavirus pandemic, Macron decided in early 2020 to put the plan on hold.
This year will be one of pension reform.
Emmanuel Macron
French President
There is some talk of a re-planning in early 2022, but it is considered too close to the presidential election, which took place in April last year.
“This year will be one of pension reform, with the aim of balancing our system in the coming years and decades,” Macron said during his New Year’s address.
“As I promised, this year will really be about pension reform, which aims to ensure the balance of our system for years and decades to come.”
He added that he wanted to complete the negotiations in time for the new rules to take effect from the end of summer 2023.
“There will be disturbances, there will be strikes, [but Macron] have decided to be quick: the current procedure should not take more than 90 days,” Renaud Foucart, senior lecturer in Economics at Lancaster University, told CNBC’s “Squawk Box Europe” Tuesday morning.
“It might be quick and dirty, but it’s a lot more than it was five years ago,” he said.
What do you want?
One of the main issues is the new retirement age. Previously, Macron suggested that this could be raised from 62 to 65, but gradually with an increase of about 4 months every year until 2031.
French media have reported that the government is considering increasing the minimum pension amount to make the transition to a longer working life acceptable to the public. CNBC could not independently verify this information.
Macron’s first proposal, from 2019, is also planned to deal with the so-called “special regime.”
Any new changes to the agreement could trigger a backlash from the affected industry.
France’s extremely low retirement age is affecting public finances. The country’s pension advisory council has reportedly estimated a deficit in the pension system of around 10 billion euros ($10.73 billion) per year between 2022 and 2032.