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ORIGINAL FRENCH ARTICLE: Pourquoi cette réforme est inacceptable

by Y. H.

France: Why The Pensions’ Reform Is Unacceptable

Translated Monday 29 October 2007, by Emma Hearle

Sarkozy wants to impose a reform that would cut the pensions of workers in “special regimes” by a quarter. Without redressing the inequalities of the retirement system.

The method: an iron hand in a velvet glove. Nicholas Sarkozy reiterates: on the subject of retirement, “there are many things to discuss.” Many things indeed, but not the most essential part: the government declared in advance that the most vital points of its pension reforms project regarding the special regimes (employment sectors which enjoy so-called "generous pension agreements") were “non-negotiable.” These include an increase from 37.5 years to 40 years of tax contributions necessary for workers to qualify for a full pension, but also tax breaks if this period of time is not reached, and the re-calculation of pensions on costs and no longer on salary sizes. The removal of the special right to early retirement for employees of the public sector companies affected (SNCF, EDF-GDF, RATP), who have to work hard will also be “non-negotiable.” In fact, the government is not confining this intolerance to those who benefit from the special regimes. Whilst a major meeting is planned for spring 2008, involving unions and employers’ groups discussing a new reform of the general system in the private and public sectors, Prime Minister François Fillon has already stated that he is consideringh a new extension to 41 years of tax contributions for full pension rights, then 42 years inevitable...

The cost of the reform: a drastic decrease in pensions

“Who can accept a 20-25% reduction in their future pension?” asks the secretary general of the CGT (Confédération Générale du Travail) in today’s Le Monde. According to the union’s calculations, not refuted by the government, the implementation of the “non-negotiable” rules set by the government will cause a large decline in the pension levels of workers in the special regimes by 2015.

Two false arguments: equity …

To help swallow the medicine, Sarkozy’s propagandists hammered across the message that railway workers, RATP workers, and workers for the national electricity and gas companies (EDF and GDF) would continue to enjoy special retirement privileges. An overall, honest comparison of their various situations uncovers a more contrasting picture: if they pay taxes for shorter periods of time and are allowed to retire earlier in return for doing demanding or disagreeable work, workers under the special regimes pay for these advantages through relatively lower salaries than in the private sector, and through tax contributions that are higher than those in the private sector. And all this for pensions of equivalent value in the end. Equity would involve taking inspiration from these particular systems to introduce the right to early retirement expected in return for difficult work into the general system.

…and the financing of special regimes

The deficits that the special regimes sector (except EDF-GDF) is experiencing, and for that matter that the whole labour-force is also experiencing, are due to the declining proportion of tax-payers to pensioners. This is the result of both demographic evolution and companies’ restrictive employment policies. Stopping the advantages of the special regimes would not solve this problem in any way, and the problem of social security programme even less.

Real privileges “forgotten”

“We are living longer, so if we do not want to reduce pensions, we have to pay more tax contributions,” according to the president. In reality, under his reforms we would contribute more and earn less. Assuring the system’s durability whilst guaranteeing retirement at 60 years old, with a good pension, means first attacking real privileges- such as stock options, completely exempt from taxation, which total a loss of a potential 3 billion euros for the social security programme. Further to this, the political courage of which Sarkozy is so proud should lead to a tax reform to widen the tax base to the financial revenue of businesses and to adjusting the rates according to the government’s employment and salary policies.

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