Emmanuel Macron faces dilemma over decision on pension reform

The streamlining of France’s devilishly complex and costly pension system was to have been the mother of all reforms, the prestige project of Emmanuel Macron’s first term in office.

He almost got it done, toughing out a winter of transport strikes in 2019-2020 and then having former prime minister Édouard Philippe pass the reform by decree in the National Assembly on March 1st, 2020. Two weeks later, France went into its first Covid-19 lockdown. Instead of moving on to the Senate and back to the Assembly for a second reading, the law on pension reform was frozen.

The original law has been abandoned, but pension reform is thawing. Its resumption "is not a question of if but when", says government spokesman Gabriel Attal.

Macron's entourage – like the country itself – is divided between "frugals", led by finance minister Bruno Le Maire, who want the reform to go ahead this autumn, and "prudents", including the speaker of the National Assembly Richard Ferrand and François Bayrou, a Macron ally and leader of a small centrist party, who say it is urgent to hurry up and wait.

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The dilemma is stark. If Macron stalls on the reform, conservatives will accuse him of lacking political courage and being a spendthrift. If he goes ahead with it, he risks provoking strikes and mass demonstrations.

‘Madness’

Macron met France's social partners at the Élysée Palace on Tuesday to discuss a possible relaunch of the aborted reform. No announcements were made, but Laurent Berger, the head of the CFDT, France's largest trade union, said he and seven other trade union leaders "were almost unanimous. We told the president that making the pension reform in the autumn would be madness".

Geoffroy Roux de Bézieux, the head of the business management group Medef, who also attended the meeting, said, "The president reminded us that all countries have done this type of reform, but he did not reveal his intentions."

Medef favours raising the retirement age from 62 to 64 in the hope of reducing budget deficits but advocates postponing the measure until after the April 2022 presidential election, because social unrest could impede France’s post-Covid recovery.

Macron’s notoriously poor relations with Berger are not helping him to resolve the pension dilemma. Berger supported Macron’s original promise of a “systemic” reform of pensions which would have reduced France’s 42 different pension regimes to a single, universal system in which salaried employees would have accumulated points. The idea of a “parametric” reform in which parameters – mainly the retirement age – would be altered was always anathema to Berger.

Now Macron has abandoned all thought of a systemic reform in favour of raising the retirement age to 64, say media reports. He is following the advice of the Tirole-Blanchard report, commissioned by Macron and published last month.

The Nobel prize-winning economist Jean Tirole and Olivier Blanchard, a former chief economist for the International Monetary Fund, said the proposed reform was so difficult to understand that they were unable to calculate their own pension benefits.

Public debt

Macron’s original reform was intended to make pensions more equitable, not necessarily to save money. But France’s “whatever it takes” strategy of shoring up the economy through the pandemic has raised public expenditure more than five percentage points, to 61.8 per cent of GDP. Public debt has increased by €487 billion during Macron’s term. “The Great Reformer” has become “The Great Spender”, says the conservative weekly Le Point.

Pensions consume a quarter of all public expenditure in France, or 14.7 per cent of GDP. Raising the retirement age by two years would reap huge savings.   An Ifop poll published last month showed that 72 per cent of members of Macron's La République en Marche and 70 per cent of those in the conservative party Les Républicains want him to relaunch pension reform. By doing so, he would steal a march on the future LR presidential candidate, possibly Xavier Bertrand.

But in a more recent BVA poll, 66 per cent of respondents opposed raising the retirement age. The extreme right-wing leader Marine Le Pen, who may face Macron in the presidential run-off next April, promises to lower the retirement age to 60.

Macron is dragging out his decision, as he often does. He will probably make a major speech before Bastille Day in which he will outline plans for the remaining 10 months of his first term, and give indications of what he will do if he wins a second five-year term. He is expected to use uncertainty surrounding the Delta variant as a pretext to delay his decision on pension reform.

One likely scenario is an announcement in the autumn of the modalities of the reform, while postponing its adoption until after the presidential election.