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France's government suspends pensions reform in new budget bill / Photo: © POOL/AFP
NYSE - LSE
France's government suspends pensions reform in new budget bill
France's government on Thursday moved to delay the application of a controversial 2023 pensions reform, but sparked criticism for seeking to pay for it with increased health insurance taxes and frozen pensions.
The measure comes with France mired in political deadlock since President Emmanuel Macron last year called for snap parliamentary polls, which he hoped would cement his power but instead ended up in his centrist bloc losing its majority.
Prime Minister Sebastien Lecornu earlier this month promised to postpone the unpopular pensions reform, which includes raising the age of retirement from 62 to 64, in a bid to survive a confidence vote in the legislative chamber.
The Socialists, a key swing group in the hung parliament, had demanded the reform be cancelled.
Lecornu made the concession following a mad week of politics that saw him resign then be reappointed, after the lower house toppled his two predecessors in a standoff over cost-cutting measures.
Lecornu's cabinet on Thursday in a so-called "corrective letter" postponed the new retirement age of 64 and revised pension plan contributions until January 2028, after the end of Macron's second term in office.
The measure is part of an austerity budget bill for next year that still has to be debated in parliament.
But the government said postponing the reform would cost 100 million euros ($116 million) in 2026 and 1.4 billion euros ($1.6 billion) in 2027.
To cover those costs, it planned to increase taxes from private health insurance companies, and said pensions for that period would not rise according to the cost of living.
In France, those who can afford it take out private health insurance on top of public health insurance to cover any difference in medical costs.
Labour unions were incensed, saying retirees would lose purchasing power.
"Retirees of more modest means cannot bear such a measure," said Yvan Ricordeau of the CFDT union.
Critics also said ordinary people would likely have to pay higher private health insurance fees to cover the tax hike.
Denis Gravouil, of the CGT union, said that this too "would have repercussions on employees and even more on retirees", for whom health insurance was already more expensive.
A previous government in 2023 rammed the pensions reform through parliament without a vote, using a controversial constitutional power to do so, sparking months of protests.
Lecornu has promised not to use that power to force through any draft law, and put all bills to a proper debate between lawmakers before a vote.
burs-ah/cw
L.Jeong--SG
