French government prepares high-stakes pension reform

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The French government is consulting unions and potential allies to see if it could get a highly unpopular pension reform adopted by a fragmented parliament without causing mass protests that could paralyse the country.

Details of the reform are expected to be unveiled on Dec. 15 but President Emmanuel Macron has made clear the French will have to work longer, with legal retirement age potentially pushed by as much as three years to 65. Opinion polls show the vast majority of voters are against pushing back the retirement age. Labour unions, who met Prime Minister Elisabeth Borne on Thursday, told her they were against it.

“We told her she was taking a big risk, on the social front,” said CGT lead negotiator Catherine Perret. “The risk is that the pension reform will add to other topics of discontent, such as wages, the rise in the cost of energy … and that it all becomes explosive.”

Reforming France’s costly and complicated pension system was a key plank of Macron’s election platform when he came to power in 2017.

Now – with voters angry over the worst cost-of-living crisis in decades, and without an outright majority in parliament – he is back with his plan.

One option for a reform the government argues is crucial for the sustainability of public finances, is to find allies beyond his camp. The two candidates running this Sunday to be elected at the helm of the conservative Les Republicans (LR) have both signalled they could provide the votes Macron needs.

But Macron would likely need to take their proposals on pensions onboard or make concessions on other reforms. In the Senate, LR have pushed for the retirement age to be brought to 64, while the number of years a person needs to have worked to get a full pension would be increased faster than planned.

Another option, which would expose Macron to much criticism from the opposition, would be for the government to get it adopted via an amendment to the social security bill via the so-called “49-3” French constitutional mechanism that allows governments to bypass parliament.

Government and parliamentary sources said there was no decision yet on what option would be chosen. Neither would do much to diminish unions’ opposition to the reform, set to go to parliament early next year.

One source said the government would put the 65-year-old target on the table and take it from there, ready to lower it if needed. “We’re firm… We’d rather avoid the 49-3 but we’ll see what they (other parties) will say.”

Source: Market Screener