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France’s Pension Situtation

June 24, 2010

Unsurprising news on the European front.  French federal employees are pretty upset about entitlement reform:

Public sector workers in France are staging a series of strikes, affecting transport and disrupting schools across the country.

Trade unions have called the strikes over government plans to reform the pensions system and raise the retirement age from 60 to 62.

Hundreds of thousands of people are expected to protest on the streets.

The government fears it will face a funding shortfall and a pension system collapse if it takes no action.

Strike organisers say they have 200 rallies planned and are hoping for at least one million protesters, although they have said that figure might be higher.

Francois Chereque, head of the moderate CFDT union, told French radio he was counting on a “very big demonstration” against “Europe’s most violent [pension reform]”.

So, what’s the actual plan here?  How many people would this affect?

…That would affect five million civil servants, many of whom retire at the age of 55, and would target the bonuses and the tax breaks that provide pensioners with – on average – a higher standard of living than ordinary workers.

According to the national pensions advisory council, if the system is not changed, France will face a funding shortfall of between 72bn and 115bn euros by 2050, and that is with optimistic assessments of the recovery.

This is obviously a shocker to nobody, given, well, Europe, but it most definitely is the future of the United States.  The reality is that there are no good options on public pensions.  Most people who are concerned about the federal budget realize this — it’s not that cutting pension funds is impossible, it’s just that it’s insanely unpopular.    But it’s one of the four main culprits of our yawning budget deficit, and something has to be done about it.  Means-testing and raising the retirement age are good ideas not because they would drastically reduce deficits, but because they would do so at an acceptable rate and they are politically feasible. Sure, these things cause riots in France, but we’ve managed to create an income tax system in this country where a majority of the country doesn’t actually pay income taxes.  It’s not fair, but it is an answer.  Unless we want to be Argentina or Greece, that is.

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