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France launches tough pensions reforms

AFP/The Local · 14 Jun 2013, 18:45

Published: 14 Jun 2013 18:45 GMT+02:00

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Under pressure from Brussels, the socialist government is looking to plug holes that will see its generous state-pension scheme fall more than €20 billion into the red by 2020.

But pension reforms are highly contentious in France, with previous efforts in 1995 and 2010 sparking mass protests and strikes. The new reform bid is likely to be the biggest test yet for President Francois Hollande's government.

The government is set to hold talks on the reforms later this month with employers and unions, who have already threatened strike action if they consider the measures to go too far.

Prime Minister Jean-Marc Ayrault said the government would present a reform plan by the end of the summer, which would then be put to parliament.

"Efforts will need to be made, but these efforts will not be crippling, they will be guided by continuity and justice," he said after receiving the report.

The expert report recommends measures aimed at saving €7 billion within the system, including an increase in the number of years a person must work before being eligible for a full pension. For those born between 1962 and 1966, the new total would be 41-5 years, while anyone born after 1966 would have to work for a full 44 years.  

The report further recommends increasing pension contributions by 0.1 percent per year over four years, with the costs shared between workers and employers.

Some income tax benefits would also be reduced for pensioners and in some cases payments would no longer be indexed with the exact rate of inflation.

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Ayrault noted that France, which has one of the highest birthrates in Europe, is not facing the same long-term pensions crisis as some other developed economies. Yet it does face the same challenge of accommodating for the post-World War 2 baby boomers reaching retirement age. 

French officials have said the system's baby-boom financing problems should be resolved within 20 years.

The European Commission late last month urged recession-hit France to eform the pension system as it agreed to give Paris an extra two years to hit the EU-mandated deficit target of three percent of GDP.

AFP/The Local (dan.macguill@thelocal.com)

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