France’s Prime Minister met trade union representatives on Monday to discuss plans to cut the country’s pensions deficit following a television appearance in which he sought to tread a careful path towards tackling one of the thorniest and most explosive issues in French politics, reports FRANCE 24.
In an interview on France 2 late Sunday, Jean-Marc Ayrault ruled out raising the minimum retirement age and left the door open to raising taxes in order to trim an annual shortfall in the pension budget that is projected to hit 20 billion euros in 2020, and “guarantee” that the system is built to last.
Reaction among economists and politicians to Ayrault’s comments was mixed, with some predicting a positive step in the right direction and others saying reforms are likely to be insufficient. Whatever the outcome, there was broad consensus that the stakes are high.
Dominique Barbet, a Paris-based economist at BNP Paribas specialising in France and the Eurozone told FRANCE 24 that he expects the government to tackle the issue by raising taxes.
“My feeling is that the final decision is likely to include a significant increase in contributions,” Barbet said, adding that if voters see that taxes are going up in order to secure the long term future of the pensions system, they are more likely to accept the increases.
"There will be street protests, that is quite obvious," Barbet said. But these are likely to take place on less of a grand scale because the Socialist Party is in power, and will be backing the measure, he said, underscoring the widespread belief that only the Left is in a position to deliver significant reform.
While Ayrault is unlikely to find a way to fully balance the pension books by 2020 simply by raising taxes, it is likely to be a “step in the right direction,” Barbet said.
Other observers were less upbeat about the likely outcome.
Read more of this report from FRANCE 24.