France’s lower house squeezes through pension reform

Contribution rates will rise, but statutory retirement age will stay at 60
By Nicholas Vinocur
||Last Updated: 10/15/2013

PARIS (Reuters) — France's lower house of parliament narrowly passed a reform intended by President Francois Hollande to bolster the finances of the country's indebted pension system on Tuesday, under pressure from the European Union.

The National Assembly, where Hollande's Socialists have a majority, backed the law by 270 votes in favour and 249 against. His ecologist Green and Radical Party of the Left (PRG) allies both abstained, as did 17 of his fellow Socialists.

The bill is one of the flagship pieces of legislation of Hollande's presidency and has been criticized by some for not being ambitious enough and by others for unfairly hitting low-income workers. It must still be examined by the Senate upper house but is unlikely to be modified before it enters law books.

Hollande took a careful approach to the reform, opting to adapt the current system by raising the level and duration of pension contributions rather than attempt a politically risky increase in the current statutory retirement age of 60.

His softly-softly approach has staved off a repeat of huge street protests against earlier reforms by his centre-right predecessor Nicolas Sarkozy in 2010. Rallies on Tuesday gathered only hundreds in major cities — an even smaller turnout than for a previous round of protests on Sept. 10.

But the modest overhaul has yet to convince the European Union's executive arm, which is pressing France to cut its overall public deficit and to overhaul its economy, that he has gone far enough to fix the system durably.

The reform aims to fill a hole in pension coffers due to reach 20 billion euros ($28 billion Cdn) in 2020 if nothing is done. It will raise contributions slightly for both firms and workers.

EU Economic and Monetary Affairs Commissioner Olli Rehn asked France last month to prove the reform would not add to already high French labour costs. The government said it would offset the increase in employer contributions by lowering the amount they pay for family benefits.

Thierry Lepaon, head of the hardline CGT union, called the reform "unfair" because it penalizes younger workers.

"Not only are we going to work for longer, not only are we going to pay for years and years, but in general this means five to six years of additional contributions from one generation to the next," Lepaon told a Paris rally.

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