- The outline of the new pension reform has been announced. The contribution period will be longer, contributions will be increased, some savings will be made on pensions and an "arduous working conditions account" will be created.
- The reform focuses on the private pension scheme and wants to balance its deficit by 2020. The deficits of the public sector plan and the other special schemes are left unchanged.
- About two-third of the EUR 21 billion overall financing gap expected in 2020 remains to be covered.
- Further reforms will be needed to ensure the future and the fairness of France's pensions system.
On 27 August 2013, Jean-Marc Ayrault ended the suspense by presenting the outline of France's new pension reform. The related bill, which was officially presented in the 18 September cabinet meeting, will now be put before Parliament on 7 October. The final text of the reform is unlikely to be very different from the outline already announced and discussed in this article.
The plan has received a mixed welcome, and has met with more reservation than enthusiasm. It aims to improve the pensions system, and so meet the definition of "reform", but it does not represent a structural reform since the changes announced are neither far-reaching nor radical. The reform simply involves adjusting some of the system's parameters and characteristics, and it will only partly close the system's overall deficit. This is specifically pinpointed by rating agency Fitch, although it deems the reform a "credit-positive" step. The European Commission is also likely to give its qualified approval, acknowledging the effort made to shrink the deficit but questioning the options selected.
A necessary reform, but a partial one…
According to the latest projections by COR (French pensions advisory council), which date from March 2013, the financing gap for all of France's state pension plans will be EUR 21 billion in 2020. The government is using this figure as the basis of its calculations, but it is a low estimate given the underlying economic scenario. It assumes average growth of 1.6% per year between 2011 and 2020, labour productivity gains of 0.9% per year and an unemployment rate of 7.6% in 2020. The growth and productivity assumptions are optimistic, but not excessively so. However, the unemployment rate forecast is very optimistic. It seems unlikely that the 3.5-point increase between the top of the cycle in early 2008 (7.5%) and mid-2013 (11%) will be reversed in the six years from 2014 to 2020. A higher unemployment rate means a larger deficit in the pension system.
BY Hélène BAUDCHON
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