“I want a retirement,” read metre-high block letters painted on a banner being waved in France’s latest bout of demonstrations over proposals to reform the country’s pension scheme for government employees. If the very concept of retirement was truly under threat, most reasonable people would consider this a perfectly legitimate subject for protest by the 1.5m-3m people who have practically shut down France in a series of organised demonstrations lasting a few days at a time.
Similarly, it would explain why union leaders are threatening to topple the government of Nicolas Sarkozy in nothing short of a constitutional revolution harking back to the student riots of 1968 that forced president de Gaulle to step down. It would also explain a massive turnout of imminent retirees facing a life of comparative poverty in a pension-less old age.
However it’s not even remotely like this. The banner was held aloft by a man in his early thirties while some of the marchers are schoolchildren as young as 12, walking along behind their teachers, and students who haven’t even entered the workforce. Most of the others are middle-aged or younger employees. Further, the concept of retirement is not under any kind of threat. Among other modest changes, all the government intends to do is delay the pensionable age by two years, from 60 to 62.
Yet as in previous nationwide protests over official attempts to modify France’s ruinously expensive official retirement scheme, oil refinery workers shut down production and thousands of petrol stations were forced to close. Fully-laden ships sat idle in ports. Most commercial flights could not get off the ground after airport workers walked off the job. And roughly 40 percent of scheduled services of the state-owned rail company, SNCF, were cancelled.
All this has happened at the instigation of unions who now claim just seven percent of all France’s paid workers as members, down from 20 percent 30 years ago.
As they have in the past, the demonstrations turned ugly. Hooded teenagers pelted police with glass and rocks while rioters known as casseurs smashed shop windows with bricks and stolen bicycles. In France, it seems, many citizens are worried about their retirement even before they’ve reached working age.
Although embattled president Nicholas Sarkozy insists the reforms will go through in late October, come what may, the unions – syndicats – promise further rounds of these increasingly vicious protests in coming months.
Militant leaders such as postman Olivier Besancenot of the New Anticapitalist Party, which has flopped at formal elections, openly admit they want to bring the government to its knees and give power back “to the streets” over what they say are “high-handed” and “dictatorial” actions. (In fact, the reforms have been under discussion for nearly 20 years and are little different from proposals drawn up by earlier governments.)
As some of the demonstrations deteriorated into riots, union leaders had the gall to express surprise and dismay at the turn of events. “The violence is not the work of the unions,” professed Bernard Thibault, head of the CGT, France’s second-biggest union. However riots and public disorder in general have increasingly become the norm in union-organised mass protests over welfare reform as the casseurs and other troublemakers come out to play.
Welcome to the battle, either on the streets or in elected assemblies, for pension reform as massively indebted European governments struggle to repair public finances hit by the crisis and threatened by fast-mounting future obligations.
Like many other advanced economies in the so-called industrial countries, France can no longer afford the generous pension schemes that were agreed in very different times – that is, when the working population was much bigger than the retired one. But as the proportion of retirees continues to grow because people are living longer, the burden on taxpayers will rapidly become intolerable. Economists call it “inter-generational theft” whereby tomorrow’s workers will be forced to subsidise their non-working elders.
France is seen as something of a testing ground in this battle. As president Sarkozy has repeatedly warned the demonstrators, his government won’t crack this time simply because it cannot afford to do so. All previous attempts at pension reform were made by governments of the right – in 1994, in 1995, in 2003, and as recently as 2006. In each case the administration buckled in the face of union-run demonstrations that paralysed the economy.
The system of government-funded pensions is so generous that it has become unaffordable and the retirement pot is fast emptying. “I will see through pension reform because it is my duty as head of state to guarantee to all French people that they and their children will be able to count on a retirement where the pensionable income is maintained,” declared Sarkozy as the rocks were flying. His government is however ready to discuss marginal issues, especially those relating to hardship and time-scales for full pension entitlements.
The nub of France’s and similar countries’ difficulty is the mounting burden of future obligations, and in particular that imposed by welfare and pensions. As a recent and alarming study by the International Monetary Fund notes, “the path pursued by fiscal authorities [in effect, governments] in a number of industrial countries is unsustainable.” Only drastic measures could “check the rapid growth of current and future liabilities of governments,” declares the report, The Future of Public Debt: Prospects and Implications.
In short, the clock is ticking down rapidly to a kind of financial Armageddon as sovereign states simply run out of the money necessary to keep their retired citizens in the lifestyle to which they want to stay accustomed.
An all-round dose of “fiscal tightening,” the IMF warns, is essential to restore public levels of debt to reasonably safe levels within a period of 10 years. That will require the kind of budget surpluses that few industrialised countries have been able to achieve, even before the financial crisis. As IMF figures show, France is by no means the most vulnerable nation. While it needs to post a surplus over GDP of 9.4 percent in the next decade to get back on a reasonably virtuous economic track, that’s a significantly smaller percentage than other countries such as the US (11.4 percent), Japan (14.4 percent), Ireland (14.6 percent) or the UK (14.8 percent).
Greece, the European basket case, illustrates what can go wrong with overly generous pension entitlements. By universal agreement, Greece’s public finances were in dire straits largely because employees in the public sector have retired early on fat pensions, placing excessive demands on the tax-paying community.
Yet the very people who should be taking the lead in the restoration of Europe’s finances still have their hands deep in the honey pot. In October, European members of parliament, who enjoy some of the fattest pensions, benefits and expenses of any elected representatives, are fighting for even more generous maternity leave for all Europeans and, of course, themselves. They want an EU-wide law guaranteeing at least a minimum 20 weeks, up from the present 16 weeks, plus 100 percent of pre-maternity pay and two weeks paternity leave for fathers.
Main banner-waver in this campaign is Portuguese socialist Edite Estrela who has come to the conclusion that existing laws “penalise women for having children.” Struggling Portugal happens to be one of the European nations least able to afford just such an extra taxation burden. Fortunately, it seems sanity will prevail in this instance. France’s secretary of state for the family, Nadine Morano, has done the sums and told the Eurodeputies their proposals will cost her country alone another €1.3bn a year.
Meantime other regions are heading in the opposite direction, Asia in particular. Malaysia, which already has low levels of welfare, is moving to raise the official retirement age from 58 to 60. Of course, pension payments are generally much less generous in Asia than in Europe.
In Singapore, another low-welfare state where the official retirement age is 62, former prime minister Lee Kuan Yew believes the very idea of stopping work because of age, is a dated and dangerous concept. Now 86, he told a meeting in October when asked about the challenges posed by the growing older population: “You work as long as you can work and you will be healthier and happier for it.”
While France burns, some countries are moving in a more fiscally responsible direction. In Germany, Spain, Iceland and Norway, for instance, the official pensionable age is now 67. According to the OECD data, the average legal retirement age in all OECD countries is 64, which makes France very much the odd man out.
But that doesn’t matter to militant leaders such as Olivier Besancenot who sees these regular bouts of economic paralysis as a portent of victory in a global revolt by workers. “Faced with the radicalisation of government,” he said, “it’s necessary to fight with even more radical responses.” And firebrand leader of a left-wing party, Jean-Luc Melenchon, also a European MP, harks back to the revolution. “Power is now in the streets,” he warns. It was too late for “institutional solutions.”
It is of course an institutional solution that president Sarkozy proposes. The real battle therefore may be not so much about pension reform but about who runs the country. In coming years other nations may find themselves having the same battle.
