French politics

Sarkozy and the UMP government have stood up to the test and passed the reforms. Though the French public may not have been too happy about the need for these reforms it was certainly difficult to deny the basic financial shortfall of the current retirement policy.

As the head of the french old-age pension institution stated in a startling statement on the evening news: for every twelve months paid out, 11 months of dues were raised, and the rest was borrowed.

The situation needed reform and ideally should push the country to consider the value of capitalising some of its unfunded future liabilities: markets are potentially volatile but so are demographic assumptions. Unfortunately, there are no real ways to hedge against a population statistic especially when it amounts to an 8.3% shortfall year-on-year. There are ways, however, to hedge and consolidate capital gains.

I realise I am stating this from a particular professional and personal background that favours such a system but it is worth considering the costs and benefits associated with a pay-as-you-go solution compared to a capitalised mode (even if such a shift occurs only partially over the current model).

Tariq Scherer
http://scherer.dyndns-web.com/

In America the retirement age has changed because people live longer. For example, it used to be 65yo but for me because of the year I was born it will be 66yo and 4 months. The children these days don't really start working until they are 26yo and so because they start working later they need to retire later. My sister got laid off at the age of 59yo and just got hired at a really good company. You need to have something to offer and do your job well. gail

@Marie Claude

From Nation Master, Ireland and Iceland do far better (more than 20%!) per capita per hour than France in terms of productivity. (I suppose that they work at most 1900 hours, I did not find the data for them) This does not necessarily mean that "they are right". Productivity (based also on assets) is related to debt (liabilities for buying those assets). If you look at the external debt per capita, Ireland has 8 (!) times more than France so this will explain some productivity gain and some of the present debt concerns. Iceland has 5 times less than France but data is from 2002 not 2006-2007 as for the rest so we cannot compare properly.

Productivity is only part of the complex picture and does not means that "France is right".

Tudor

France has an elected Parliament. Yet the Socialists ask government, and Parliament, to bow to pressure from the streets, Madame Aubry even asking for Parliament to "stop debating" - the media, reporting on the demonstrations, glide over the fact that a majority of French think the reform is necessary in the long run. It is an old tactic: you cannot get elected, then you apply pressure from the Unions' cohortes. It is a sort of low-level coup d'état which ruins popular sovereignty vested on Parliament and, how very French, re-inforces presidential preminence. This is hardly a Republic any longer, but a "régime".

in developing countries, like here in Chile, many look up to western european countries, specially the welfare state. but, my fellow latin americans and others, is this really what we want? is grown men expecting to be treated like children by their government any progress?

you

The French are a spoilt-rotten, mollycoddled lot, who refuse to see the sinister writing on their dismal wall, for years on end. And their labor Unions appear even more deluded & blind to the harsh realities facing the nation.

I feel sorry for Sarkozy & anyone in power, who have no choice but to enforce cuts & controls, if they hope to salvage the nation from abject economic collapse.

Wake up folks, & smell the stench of the imminent national bankruptcy wafting all across the country...

Wow, TE using that photo really? I am pretty appalled by the inconsistency in the level of journalism on this website.

Oh come on, TE crediting Sarkozy for this reform, which by the way SHOULD EXIST, it is Eric Woerth's idea.

flask ,you're too impressed by your culture

Well it's now clear the French lack rationale as well as a strong work ethic. Nothing without Foucault.

"Until the French fall in line with the rest of the world, factories will be shut and/or moved to countries with more realistic workers, jobs will be lost, unemployment levels will continue to soar, deficit will spiral out of control, and the French economy will disappear down the drain."

you would be surprised, already delocated luxe industry delocated to China are coming back home, the quality of work there doesn't fit our quality standards, idem for services enterprises in northAfrica, comes back oo, cuz of the quality too. So Calculs are quick, if you lose customers, not because of a more attractive price, but because of quality, then you know that you have to return to your tradition !

eventually they will work every other Wednesday when the moon is not so close by.

Agent plunker

" but your Euro goes far further in Germany than in France. "

thanks to her exportation surplus, not because of foreign investments, France is still the attractive country for them

http://www.lesechos.fr/medias/2010/0719//020674583945_print.pdf

"What's the point of making more in France if you pay even more than the difference in taxes and higher prices?"

uh, no our prices are average like in the other EU countries, even buying a house in France cost less than in Germany,UK, Luxemburg...

hmmm no we aren't a stratified state, like Spain and or Italy, besides we also make more graduated in world wide

http://tinyurl.com/26xxrwb

"the French have more vacation time is only partially relevant"
idem for Germany, Austria, Luxemburg...

"as a North American, I was shocked at how low the standard of living is in France "

when were you in France? in the fifties ?

"French exceptionalism often fails to grasp that"

hmmm your papers only talk of the union strikes, that aren't representative of the french enterprises mobs, and laws pass inspite of them

from this data, we can see that the french retirment costs were in the main EU countries averages, Italy, Austria, Germany, Neederland, Luxemburg.

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-NK-02-006/EN/KS-NK-...

http://www.oecd.org/document/56/0,3343,fr_2649_34757_44970488_1_1_1_1,00...

a complete analyse for the 27 EU countries:

http://ec.europa.eu/economy_finance/publications/publication14992_en.pdf

don't forget the birth rate: france, 2 to 2,2 vs Germany, 1,3

Aso, up to the last couple of years, if you hadn't 40 years of work you couldn't get the full retirement wages at 6O, only if you retired at 65. Now it's 41 years required, soon 42, so even the fatidic 62 won't make it if you still haven't your 42 years of work. Only Administrations had the privilege to retire after 37,5 years of work.

All this has shown is that the French population (and the unions in particular) continue to live in their own little fantasy world where the fundamental laws of economics that apply to other countries in the developed world don't apply to France. You can't have a career spanning only 40 years, paying a 'normal' amount of taxes during that time, and then expect governments to support you out of those same taxes for 20 or more years of retirement. It just doesn't work.

Until the French fall in line with the rest of the world, factories will be shut and/or moved to countries with more realistic workers, jobs will be lost, unemployment levels will continue to soar, deficit will spiral out of control, and the French economy will disappear down the drain.

Perhaps the only thing that is surprising about all of this is that the truly bizarre French unions haven't taken the opportunity afforded by these most recent pointless strikes to demand that the retirement age actually be LOWERED even further to perhaps 50, with all retirees receiving an annual paid holiday to Tahiti all expenses paid by the government.

Ha! Typical lazy Europeans. I don´t know much about economics, but i don´t think Europe is going anywhere if people insist on not working!

@Marie Claude,

It's not just work and productivity, but purchasing power as well. Germans may make a bit less than the French, but your Euro goes far further in Germany than in France. What's the point of making more in France if you pay even more than the difference in taxes and higher prices?

The French system (like the Spanish system) also demonstrates a huge structural problem of two-tier employment: a high-benefits sector, with little labour turnover and high employment, and a low-benefits sector with few rights and high unemployment. French generosity comes at a cost to those who have no access to that system, and French society is enormously stratified compared to others. More to the point, the argument that the French have more vacation time is only partially relevant. When you have plenty of time to live life but no money to do anything interesting, how virtuous can it be? It's like claiming the best and most comprehensive health system in the world, as long as you only need aspirin.

Frankly, as a North American, I was shocked at how low the standard of living is in France (and no, I am considering things more universal than automobile ownership)!

Look, I love France, and admittedly, France's problems are not unique to France. The pension/health care bubble is threatening (at the least) every industrialized country in the world. Increasing the retirement age is just one of many needed solutions. But everything comes at a price, and French exceptionalism often fails to grasp that.

A Miraculous French Resurrection
If the French again elected a Gaulist, who expelled of all their non-European foreigners, and increased their retirement age to 72; then they would regain their lost national dignity and pride.

Flask

no they care for their family, and home, we also are in the top rank for owning a home

I'm sorry if we are so good ;-)

Exactly right. Aggregate labor productivity is declining in aggregate employment. It makes perfect sense that French labor productivity is high.

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"You should probably take into consideration diminishing returns--GDP cannot continuously increase proportionately with hours worked. Who's to say that if Americans matched the French for number of hours/days worked per year that they would not have a greater GDP/hours ratio?"

Marie Claude,

France may have a higher GDP/hours worked, but unfortunately, winning is also about working hard, not just smart. You should probably take into consideration diminishing returns--GDP cannot continuously increase proportionately with hours worked. Who's to say that if Americans matched the French for number of hours/days worked per year that they would not have a greater GDP/hours ratio? So the extra hours put in by Americans may be less efficient, but it is a "winning" formula.

The French undoubtedly know more about working less, no argument there. Back to striking!