France unveils controversial pension reforms, unions say employees' strikes ought to proceed

HERTFORD, ENGLAND – DECEMBER 04: French President Emmanuel Macron gives a press conference at the NATO summit at the Grove hotel on December 4, 2019 in Watford, England.

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French government efforts to appease public sector workers with details of its pension reform look unlikely to end an ongoing nationwide strike.

France has seen a pre-emptive nationwide strike over the last six days as public sector workers fear changes to their pension benefits. The French President, Emmanuel Macron, vowed at the time of his election in 2017 to update the country’s pension system – one of the costliest worldwide. However, Macron’s plans have sparked the biggest public demonstration since he took power in 2017.

Speaking after the French Prime Minister Edouard Philippe announced full details of the reform, Benoit Teste, national secretary of the French trade union Federation Syndicale Unitaire, told CNBC that “workers must amplify the strike, must increase it.”

Teste pointed to the concerns over a cut to pensions as the reason why the protests should carry on. Other trade unions, such as the General Confederation of Labour (CGT) and the trade union for railway workers UNSA ferroviaire, have also appealed for a continuation of the strike.

“It is time for a universal pension scheme,” Philippe said Wednesday. The government plans to consolidate the current 42 different pension regimes, which vary according to profession, into one.

“We will put an end to the special regimes, gradually,” Edouard Philippe said.

Under the new system, elected officials and ministers will be treated exactly like all French people and I think this is how it should be.

Edouard Philippe

French Prime Minister

A universal pension system

Under a single, points-based system, workers would be compensated for every worked hour. Here are some other details of the pension reform:

  • Those that were born before 1975 will remain in the current system;
  • The new system will apply to people entering the workforce in 2022;
  • For people currently in workforce, the new system will only be applied from 2025 onwards;
  • 62 will remain the minimum legal age for retirement, but there will be incentives for those that work until later;
  • Workers that earn the minimum wage but work a full career will be entitled to a pension of 1000 euros per month ($1107 per month)

The transition will be very gradual,” the prime minister said.

However, the pension reform seems to have not pleased trade unions, which have been leading a nationwide strike since Thursday last week. The strike has caused severe transport disruption, mainly in Paris, and the closure of certain schools.

On Wednesday – the seventh consecutive day of strikes – there was further transport disruption in the French capital. Ten out of the 16 metro lines in Paris were totally closed. The French rail company SNCF also warned against strong disruptions across its network.

“We are preparing a new pact between generations,” Edouard Philippe, the French premier, said. He added that the government is “seeking a consensus” and that the reform “is not a battle.”

The ongoing strike is the biggest protest since President Macron was elected in 2017.

PARIS, FRANCE – DECEMBER 05: Members of the police regroup after radical groups threw flares towards them during the first day of an indefinite general strike on December 05, 2019 in Paris, France.

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Alongside the nationwide strike, there have been two demonstrations. More than 330 000 people took part in a walkout on Tuesday. On the first day of the strike more than 800 000 people took to the streets.

“Under the new system, elected officials and ministers will be treated exactly like all French people and I think this is how it should be,” Phillippe told reporters.

Macron’s political future

The policy shift is viewed as a crucial political moment for President Macron with some analysts believing his re-election is tied to the success of pension reform.

“Macron’s best card in a 2022 election is indeed to bet on the only trait that a significant number of voters seem to assess positively: his determination to reform the country,” Antonio Barroso, deputy director at the research firm Teneo Intelligence said in a note Tuesday.

The pension reform proposal will be discussed within the government in January and be put to the French parliament in February.

“It is too early to tell what will happen next,” Tomasz Michalski, associate professor of economics at the H.E.C. Paris business school told CNBC Wednesday.

“The demonstrations on Tuesday were weaker in terms of numbers, and the country may be getting tired of the strikes,” he said, adding that the holidays may weaken the ongoing protests and give time to the government to make some adjustments.

PARIS, FRANCE – DECEMBER 05: Protestors chant and sing songs against President Macron during a rally near Place de Republique in support of the national strike in France, one of the largest nationwide strikes in years, on December 05, 2019 in Paris, France.

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