Is Macron ready for a street fight? The petulant nation is resistant to pension reform

The size of the demonstrations took the government and its internal security services by surprise. The marches were especially large in the mid-sized, provincial towns where trades’ unions appeals for “manifs” (demos) and nationwide strikes usually go disregarded.

Unlike the atypical and unstructured Gilets Jaunes protests of 2018-9, this was an old-fashioned revolt led by the trades’ unions. Unlike any such protest for more than a decade, all eight of the French trades’ union federations took part.

Another day of nationwide strikes and marches has been called for a week on Tuesday. Battle-lines are being drawn for the biggest and most disruptive government versus union confrontation in France since 1995.

The issue back then was broadly the same as now — social security and pension reform. The unions triumphed. President Jacques Chirac capitulated after three weeks. Will President Emmanuel Macron also be forced to back down?

Some of his officials and supporters have been rattled by the size of Thursday’s marches. The President is right, they whisper, but he has failed to persuade the country. You cannot change a querulous nation like France against its will — even if the change is for its own good. Au contraire, say others close to the President. France is always reformed against its will. Protest is a national ritual. Future generations will thank Macron for leaving the country stronger than he found it. Maybe. In the meantime, grinding confrontation is inevitable. Compromise appears impossible; neither side can afford to lose.

Defeat for Macron would leave him, aged 45, a domestic lame duck for the remaining four years of his second mandate and the last four years of his political career. Defeat for the union federations, after years of declining membership and influence, would mark the end of their power as an organised — or even disorganised — force in French life. What displaces them might look more like the Gilet Jaunes movement: angry, chaotic and violent at the edges.

But was this confrontation really necessary now, when war is raging 1,500 miles to the east and Scholz is in town to dicusss it, when inflation is booming, and when tempers are still stretched by the Covid pandemic?

Macron has good reason to want to reform the muddled and often unfair French pensions system. He is right that French people must work longer if they want to maintain the strength of their economy and their generous (for some) welfare system, pensions included. One in four of France’s population of 68,000,000 is retired. Unless the state pension system changes, there will be only six French workers to support five pensioners by the middle of this century.

To face this challenge, most other developed countries have raised the legal retirement age to 65, even to 67. Macron is publishing detailed legislation to shift France’s official retirement age from 62 to 64 over six years. It is due to be enacted in March and go ahead from September. If the reforms go through, French people will still retire earlier in 2030 than Britons, Germans, Belgians, Italian, the Spanish or the Americans do now.

But while the argument for reforming the pension system is strong; the argument for doing so immediately is weaker. The Covid pandemic killed so many old people that the system is, for the time being, in reasonable balance between pension payments and monthly contributions by workers and their employers. That balance will be lost in the years ahead but only gradually.

Macron’s reasons for pushing ahead now are partly political. He promised a radical but painless pension reform when he was first elected in 2017 but withdrew his complex and much-hated package of changes when Covid struck in 2020. A second attempt at pensions reform was the headline proposal of a mostly unmemorable Macron re-election platform last year. He won in April but lost his parliamentary majority in June. If he abandons pension reform again, what will he do in his second term?

There is also another reason for rapid action which dares not speak its name: money.

The reform should save Euros 100bn in state or tax-payer top-ups to a loss-making state pension system over a decade. Without the changes, it will be difficult for Macron to reduce France’s annual budget deficit to the 3% of GDP which is the official limit for countries which use the Euro. France’s deficit will be 5% of GDP this year. Macron has pledged to hit the 3% target by 2027. But this is not an argument that is used publicly. Increasing the pension age to please Brussels does not play well through the country.

In fact, there is even more taxpayers’ money at stake.

France has no private pension schemes or individual pension pots. All but the very richest people depend on the state pension system for their old age. In theory, payments to the retired are matched by the contributions of active workers and their employers in each of 42 different state regimes — whether for rail workers, the self-employed, farmers, lawyers, Paris Opera ballet dancers etc.

Some of these regimes are roughly in balance. But the generous pension provisions for state employees – including retirement in their late-50s for rail workers and pensions of 75% of final year pay for all state-sector workers – are catastrophically and permanently in the red.

The shortfall of around Euros 30bn a year is paid by the national government (ie the taxpayer) on top of its normal contributions as an employer. This has become so accepted that it is never mentioned as part of the overall, annual pension “deficit”.

This permanent drain on French state spending is equivalent to more than half the country’s annual defence budget. Macron’s reform would not end such losses overnight but would free a few useful billions for more constructive spending and for deficit reduction.

As a political argument, though, it’s pretty taboo. Reducing taxes is always portrayed in France as a “policy for the rich”. So the President is peddling another line. France can no longer afford to work less than its EU partners or international competitors. According to an OECD study, France worked 630 hours a year per inhabitant in 2018, including children and the retired. Germany worked 722 hours per inhabitant; the UK 808 hours, and the USA 826. This is partly because of the 35-hour-week and unemployment but also because of the early retirement age.

The trades’ union response to these arguments is a mixture of reasonable fact and obfuscation. France’s real average retirement age is already 62.9, they point out (true). Some people already have to wait until they are 67 to claim a full pension (also true). Any increase in the official retirement age would disproportionately punish working-class people because they start work young, while the middle classes are studying (true but addressed in part in the small print of the reform).

The pension deficit could be made up in other ways, the unions say, by higher monthly contributions from workers and their bosses or by a levy on high pensions. That would work, for a while. It would also increase the jobs-destroying, pay-roll tax burden in one of the highest-taxed countries in the world

The present system is often unjust to women, farmers, the self-employed and to the employees in the private sector generally. If you work for a private company, rather than the state, your pension is 50% of average earnings in your best 25 years, compared with 75% of final salary for state employees.

And private-sector employees pay not only their own pension contributions but, as already mentioned, subsidise the pensions of state worker through their taxes.

Obviously, the unions have no reason to draw attention to this anomaly. Their waning support is heavily concentrated in the state sector. And the big marches and strikes last week were dominated by public employees, from rail workers to teachers. There were few big strikes in private enterprise — but a surprising number of private industry employees joined the provincial marches.

Macron and his government for some reason have chosen so far not to try to exploit this potential private-public divide. Perhaps they would rather sell it as something uniformly positive, rather not divide and rule. That may yet change.

The unions also have to be careful what they do next. Militant voices are calling for open-ended rail strikes, cuts in electricity supplies and blockages of petrol refineries. But the national union leadership fears that such a hard-ball strategy would turn public opinion against them, not against Macron.

Seen from abroad, there is something demographically and economically irrational about the French aversion to an advance in the retirement age from 62 to 64 by 2030. Irrational or not, the opposition to pension reform is deep and passionate. Up to 70% of people tell pollsters they see no reason to work longer. And as the pro-government politician Jean-Louis Bourlanges points out: “Opinions may be mistaken but the fact that millions of people hold those opinions remains a political fact.”

French people are not lazy. Those who work do so very productively. But much of the country has a kind of teenaged relationship with the state — a blend of petulant rejection and needy dependency. There is a constant demand for “change” but an opposition to all changes. Presidents are elected to get stuff done but, once elected, are resisted. The “street” counts more than in almost any other large democracy.

So what next? Despite his lack of a parliamentary majority, Macron has a reasonable chance of pushing the reform through the national assembly in March. The centre-right Les Républicains, who hold 62 swing votes, are, in theory, in favour. The final version of the proposed reform, with 64 as the new retirement age, not 65 as originally suggest by Macron – was partly shaped by them. However, the prospect of a two-month long battle with the “street” and unions is causing some centre-right deputies and even some pro-Macron parliamentarians to have cold feet.

Macron and his Prime Minister, Elisabeth Borne, could use their emergency constitutional power to ram through the reform by decree if necessary. But that would doubtless cause more strikes and, possibly, street violence.

Macron has the casting vote. The decision on whether or not to bow to public anger will be his. He is, by all accounts, determined not to be a “second Chirac”.  And paradoxically, the intensity of the opposition could allow him to appear (abroad at any rate) as a courageous and resolute leader after enacting what is, in all truth, a modest reform.

He knows that if he blinks he faces a lonely and empty final four years in the Elysée Palace.

So will he blink? Probably not.

 

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