“Is Brussels dictating pension reform?”

Sébastien Laye is an entrepreneur and director of economic research at the Thomas More Institute (a liberal-conservative think tank).

The observation is known as our anemic public finances. After two years of understandable relief in the face of Covid in 2020 and 2021, the 2022 budget reached 4.9% of GDP and the 2023 budget is already €165 billion based on error 1, or about 1% of expected GDP It sounded at the level of 5%. % growth forecast (we are unlikely to be positive…). Note that the topic is not new and before Covid France could not respect the famous Maastricht criteria, even with an effective deficit of 3.1% in 2019… This Maastrichtian framework, but it is clear that in France for 25 years budget slack is the norm and wrong the pace of governance is accelerating—also because of exogenous challenges, and not just from government. However, the European Union was economically built on German ordoliberalism, which did not adapt well to budgetary slack, even if compromised by the pandemic and monetary expansionism of the ECB. But it is clear that in Berlin, as in Brussels, the hawks are making a comeback. When we see the burden that we will pay our children, how can we agree with them? We must reduce our public spending and compress our deficits. Therefore, France has always considered pressure from Brussels as a catalyst for reform, unemployment insurance, labor rights, and pensions. But will we really save the state money with this reform?

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After spending several years trying to introduce a vague systemic reform (retirement points), President Macron turned to a parametric reform that extended the reforms of Touraine and Woerth and delayed the legal retirement age to 64 (a quarter). , with age 63 in 2027 and age 64 in 2032) with a maximum contribution period of 43 years. In practice, each postponement saves 10 billion euros in public finances. Just as in reality not everyone leaves the age of 62, there are special diets provided by the grandfather clause, by 2032 we should save about 30 billion annually. It’s nothing, but we have to wait almost ten years and the figures for certain expenses make your head dizzy: the tariff shield more than 50 billion euros, partial unemployment 70, even the recovery of the SNCF debt more than 30 … is far away.

We should not expect a (positive) disturbance in public finances from this pension reform.

Sebastien Laye

Moreover, in order to stop this reform, Elisabeth Borne had to make two compromises during discussions with social or political partners: on hardship and minimum pensions; this last point pension will provide a new minimum old age to mark the difference with ASPA (solidarity allowance for the elderly) to anyone who has worked at least 1200 euros per month. But this compromise comes at a cost. It is planned to break the industrial accident fund itself, which could increase the contributions of employers: no more social payments, therefore, a state that puts back in its pocket… the end of the grandfather clause of such schemes. Will the cost of RATP also come with expensive concessions? Will we see new social spending emerging to counter protests and buy social peace?

We have the precedent of the Woerth reform. In theory, this should have saved us 20 billion euros, but economists have not been able to find this balance sheet due to many concessions. The balance sheet is a mess. Thus, we should not expect a (positive) shock to public finances from this pension reform. The project, which is far away in time (2032), accompanied by many expensive concessions, is unlikely to change the situation by itself. But together with the next unemployment insurance reform, it sends a signal to Brussels: a signal, unfortunately distorted by the vote on the 2023 budget, as if we are agreeing to some savings in the future, not the present.

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