French vow to defend 'gold-plated' pensions

Tens of thousands of people marched through a score of French cities yesterday to demand, in effect, that nothing should be done about the most acute problem that faces France, and most of western Europe, in the next decade.

Tens of thousands of people marched through a score of French cities yesterday to demand, in effect, that nothing should be done about the most acute problem that faces France, and most of western Europe, in the next decade.

The issue is not Iraq or terrorism or crime, but pensions and how to pay for them without placing crippling burdens on those in work and hobbling the prosperity of the rapidly ageing countries of continental Europe.

Trades union members, left-wing politicians, activists and pensions campaigners marched through Paris, Lyons, Lille, Marseilles, Strasbourg and many other cities yesterday to demand that any reform should not threaten the status quo. They carried banners alleging that the pensions crisis was a fiction, invented by big business to destroy the French welfare state and public service.

But the dangers are especially great in France, which has done the least to prepare itself for a grey future and has the most generous retirement terms – especially for state employees – of any large developed country. The average "real" retirement age in the European Union is 64. In France it is 57.5.

At some point in the next 10 years, France will have more citizens over the age of 60 than under 20 for the first time in its history. From 2006, its "active" population – already one of the smallest in Europe – will start to fall, for the first time in half a century. By 2040, if the present rules remain unchanged, France will have seven pensioners for every 10 people in work. Donald Rumsfeld's jibe against France and Germany as "old Europe" was truer than he knew.

Successive French governments have avoided, or at best tinkered with, the problem. The last government that tried to reform pension rights for state employees, Alain Juppé's centre-right government in 1995-97, was buried by massive street protests. The present centre-right government of Jean-Pierre Raffarin has announced that it will prepare a comprehensive plan for reform by the end of May. Mr Raffarin is expected to present the broad outlines tomorrow.

The issue is likely to be the one which defines, domestically at any rate, the success or failure of Jacques Chirac's second presidential term and Mr Raffarin's premiership. "If we can't reform the pensions system in this country, we can't reform anything," a senior member of Mr Chirac's UMP party said.

The seven main French trade union federations organised yesterday's marches to test the government's nerve. They have agreed a common statement which accepts the principle of reform – so long as nothing changes.

The most militant unions say that any reform must make pension rights in the private sector as generous as those for state employees (which would turn the coming crisis into a calamity). All the unions, save one, say that there must be no change in the statutory retirement age of 60; some banners yesterday called for retirement for all at 57.

They also reject increases in pension contributions and cuts in pension payments, which amount to 75 per cent of final salary for life for state employees. They refuse to re-negotiate generous early-retirement arrangements in the state sector – as young as 50 for train drivers, for instance.

Instead, the unions say, the burden of paying for the growing legions of retired French men and women should fall on increased "productivity", on increased social payments by employers and on the state budget (in other words, taxes).

French industry protests that this would disastrously increase the proportion of GDP consumed by the state, already 45.5 per cent compared to 37.7 per cent in Britain. It would further reduce the active population and therefore condemn France to a permanently under-achieving economy. As it is, only 63 per cent of French people work, or want to work, compared to 70 per cent in Britain and 75 per cent in the US.

The employers say that to avoid creeping economic decline, the French should work longer before claiming their full pension. At present, state employees have to pay into the system for 37.5 years and employees in the private sector for 40 years. The employers – and many politicians and government officials in private – say that this must be raised to at least 42 years.

Yesterday's marches were just a preliminary skirmish. Much bigger protests can be expected if the government holds its nerve and produces a serious reform plan in May.