Via Financial Times

Edouard Philippe, France’s prime minister, has withdrawn a plan to raise the official retirement age from 62 to 64 in a bid to break a deadlock with trade unions over pension reform that has crippled public transport in Paris for more than a month. 

Mr Philippe’s climbdown on Saturday was immediately welcomed by the moderate Confédération Française Démocratique du Travail, or CFDT, the largest trade union group.

However, more radical trade unions, including the Communist-aligned Confédération Générale du Travail, or CGT, have vowed to continue public sector strikes and protests because they reject the entire reform as well as the mooted increase in retirement age. 

Thousands of protesters took to the streets of Paris and other cities on Saturday for the fifth day of mass demonstrations against pension reform since December 5. 

“I am ready to withdraw from the draft law the short-term measure I proposed that consisted of moving progressively after 2022 towards a balanced retirement age of 64 in 2027,” Mr Philippe wrote in a letter to unions. 

He nevertheless insisted that a conference on financing France’s costly pensions system — a negotiation proposed by the CFDT — would have to agree before the end of April on a way to eliminate the deficit in the pension system by 2027. Failing that, the government would take the necessary measures by decree to ensure the system was in balance by then, he said.

Mr Philippe’s letter gives Laurent Berger, the CFDT leader, a chance to claim victory and to end his backing for the public sector protests, while forcing the union to make hard choices on raising individual or corporate pension contributions if it does not accept the need to increase the retirement age.

READ ALSO  US executives brace for more corporate prosecutions under Biden
'Yellow Vest' (gilets jaunes) anti-government movement protester are soaked by a police water canon as he takes part of a nationwide multi-sector strike against the French government's pensions overhaul, on January 11, 2020 in Nantes, western France. - France's government on January 11, 2020, offered a possible compromise to unions waging a crippling, weeks-long transport strike against pension reform, offering to withdraw the most contested proposal that would in effect have raised the retirement age by two years. "To demonstrate my confidence in the social partners... I am willing to withdraw from the bill the short-term measure I had proposed" to set a so-called "pivot age" of 64 with effect from 2027, Prime Minister Edouard Philippe wrote in a letter to union leaders a day after they met seeking to end the labour action, now in its 38th day. (Photo by Loic VENANCE / AFP) (Photo by LOIC VENANCE/AFP via Getty Images)
A ‘gilets jaunes’ (‘yellow vest’) protester is soaked by a police water cannon during an anti-government demonstration in Nantes, western France © AFP

The CFDT welcomed the government’s “willingness to compromise” and said it would negotiate the financing of the pension system in a “spirit of responsibility” while insisting on social justice and solidarity. 

Medef, the employers’ group, emphasised the importance of Mr Philippe’s demand for financial balance in the pensions system and his conditions for dropping the setting of the retirement age at 64 and entering negotiations. It said either a reduction of pensions or an increase in the cost of labour — involving higher employer contributions — would have “damaging consequences for the country’s economy”.

Emmanuel Macron, the French president, included a sweeping pension reform in his 2017 election campaign. He has vowed to replace the 42 existing schemes — some of which grant early retirement and generous pensions to privileged workers such as railway employees financed by other taxpayers — with a universal, points-based system that is fairer to all.

Mr Berger and the CFDT support the idea of the universal system but have balked at the increase in the retirement age, although the French pensionable age is lower and the system costlier — at 14 per cent of gross domestic product each year — than in most developed economies. 

In November an official report forecast that French pensions on the existing model would be running a deficit of between €8bn and €17bn by 2025.