Economy

a new reform, for what?

The final arbitrations are underway and the timetable is becoming clearer: the pension reform will be presented around December 15, in any case before the Christmas holidays, Prime Minister Élisabeth Borne confirmed at the end of last week. The gradual decline in the minimum legal age for retirement is recorded, even if the limit varies from 64 to 65 years according to the statements of the executive. The French are therefore warned: they will have to work longer.

Save the regime or finance the schools?

What for ? Save the pension plan or finance schools or the climate transition? During her statements to the press, Elisabeth Borne willingly dramatized the remarks, calling for “save the pay-as-you-go system”.

The President of the Republic for his part mentioned, in an interview with the newspaper The Parisian of December 4, a whole litany of needs to be financed: “We spend money to protect the purchasing power of the French against inflation. We are spending money to transform and invest in the France of 2030, through reindustrialisation, and to meet our climate commitments. We spend money to develop our major public services, interior, justice, school, health…”did he declare.

And as the chief executive refuses to increase taxes or further inflate the debt, the only solution is according to him to work more. During the electoral campaign, Emmanuel Macron had put forward the need to finance expenditure linked to dependency to evoke a decline in the legal age to 65 years.

The context has changed

“Until last year, the question of the balance of the pension plan was not really crucial, decrypts a connoisseur of the file. Raising the retirement age was clearly aimed at finding budgetary leeway to finance new needs. » The context has changed with the latest projections from the Pensions Guidance Council (COR), which is more pessimistic about the financial health of the pension plan.

Admittedly, the organization does not foresee any major slippage, in the long term, in the weight of pensions in national wealth, thanks to the successive reforms adopted since the 1990s. The ratio between pension expenditure and GDP should even stabilize at term, or even fall back slightly. But in the short term, we are witnessing a rebound in expenditure as a share of GDP which brings it within an interval of between 14.3 and 14.6 points of GDP in 2032, i.e. above its level of 13.7%. in 2022. Enough to feed substantial deficits in the ten years to come.

Falling fertility

The horizon has darkened for two main reasons: demographic changes, in particular that of fertility, which will have a negative impact on the working population; and uncertainties about growth prospects. The year 2023 promises to be sluggish, but “we may enter a period of lastingly weak growth, due to the constraints of the international environment or a persistent shift towards more sobriety”, explains an expert familiar with the matter.

“Despite the extent of past reforms, we are at risk of imbalances
significant residuals in the short and medium term, which would be amplified by the continuation of
degraded economy. All of this forces us to re-examine the question of ways of balancing the
retirement system »
insist the experts of the pension monitoring committee, in their opinion of last September.

Contributions, pensions or hours of work

As a result, the forthcoming reform can be justified both by a need to finance the pension system and by the need to regain budgetary leeway for other sectors. Three tools are theoretically available to the government: increase contributions, which it has excluded from the start so as not to increase the cost of labour; reduce in one way or another the level of pensions, which is also ruled out, and finally add to working hours, the option that will ultimately be chosen.

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Paths to reform

The government plans to present the reform to the Council of Ministers in early 2023, for consideration in Parliament in the spring and entry into force at the end of the summer.

The postponement of the retirement age will be gradual to pass “from 62 to 65 by 2031”according to Elisabeth Borne

The first people concerned are those born in the second half of 1961, who will work a few months longer before they can reach the legal minimum age.

The age of cancellation of the haircut will remain at age 67.

Parental leave periods could be included in the calculation of the contribution period.

The so-called “long career” principle which allows those who started working early to leave before the legal age, will be maintained.

Source : BBN NEWS

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