PIIE Blog | RealTime Economic Issues Watch
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
Subscribe to RealTime Economic Issues Watch Search
RealTime Economic Issues Watch

Planet France Stands Increasingly Alone

by | September 17th, 2010 | 04:37 pm
|

One of the few ways in which France remains exceptional in Europe is the continued economic lunacy of its main center-left Socialist party and utterly unrepresentative labor unions.1 The positions taken in the recent debate over increasing the French retirement age provide the latest example, and they raise serious questions about the feasibility of Dominique Strauss-Kahn (DSK) leaving the International Monetary Fund (IMF) and returning to France as a presidential candidate for the Socialist party in 2012.

To his credit an increasingly unpopular President Nicolas Sarkozy has made the increase of the minimum standard French retirement age from 60 to 62 (and age of full pension eligibility from 65 to 672) by 2018 the centerpiece of his otherwise meager economic reform program for France.

This proposed increase of Europe’s lowest retirement age is precisely the right kind of policy to help sustain France’s longer-term economic prospects and fiscal solvency, and it precisely follows the structural reform recommendations of the latest IMF article IV report for France. As such it represents a welcome outcome of Europe’s recent economic turmoil.

The reaction of the French Socialist party, however, is striking, especially when compared to other southern European center-left parties. In Greece of course, the Panhellenic Socialist Movement known as PASOK is currently implementing an IMF-designed reform program designed overhaul the Greek economy, while in Spain Prime Minister José Luis Rodríguez Zapatero and his Spanish Socialist Party (PSOE) have pushed through cuts in public wages, labor market reforms, and proposals to raise the Spanish retirement age to 67.

Meanwhile Martine Aubry—the current leader of the opposition French Socialist party—has vowed to repeal Sarkozy’s reforms and return to age 60 if elected French president in 2012, and the party’s current parliamentary leader, Jean-Marc Ayrault, also decried the measure as an assault on entrenched social rights (e.g., retirement at 60, first established by Socialist President Mitterrand in 1983). Being out of office clearly facilitates fiscally irresponsible policies in France, even as French Socialist leaders stand increasingly isolated on Europe’s center-left.

In some ways, French exceptionalism in Europe is represented at the street level, too. More than a million French demonstrated in France on September 7 against the pension age increase, whereas public mass protests in Greece or Ireland have so far been muted, despite the far harsher social reforms implemented there. Similarly, an announced general strike in Spain on September 29 to protest recent policies by the Zapatero government looks likely to flop with less than 10 percent of Spanish workers planning to join. Increasingly, it looks like it is only the French and their center-left leaders that “don’t get it” in Europe.

While this raises a host of concerns about the longer-term political outlook for required economic reforms in France, given the country’s 2012 presidential election, it should serve in the short term to calm expectations of a DSK presidential run on the Socialist ticket. It is the IMF, after all, that has helped press austerity and structural economic reform on Greece and others in Europe. It seems increasingly unlikely that a party that is so unwilling to face the new economic reality in Europe can embrace a politician as pragmatic as DSK as its candidate in 2012.

While he may have coaxed German parliamentarians into voting for the Greek bailout in May 2010, overcoming a likely female opponent in Martine Aubry, who earlier implemented the 35-hour work week and now pledges to lower the retirement age back to 60, seems a bridge too far for both DSK and the Socialists in 2012.

Notes

1. France has Europe’s lowest unionization rate at just 8 percent (almost wholly in the state-linked sector), and French unions instead rely on their ability for occasional mass street mobilization and legal rights of “representation” in sectoral collective bargaining agreements for their coercive power in French society.

2. Currently the French can retire at 60 if they have paid pension contributions for 40.5 years, but only at 65 do they get access to a full pension. By 2018 the required years of contribution will also have risen by one year.

Comments (0)

Leave a Comment