Saturday, October 23, 2010

Protests in France Heat Up Over Pension Reform

NYT: French Police Begin Breaking Up Fuel Depot Blockades
WSJ: Pension Protests Heat Up
WSJ: Unions Threaten New Actions
NYT: Editorial: France, the Unions and Fiscal Reality

Nicolas Sarkozy, the President of France, recently proposed a pension overhaul that would raise France's retirement age from 60 to 62. Sarkozy claims that this reform is "essential" and that he will go through with it, despite the public outcry. France has a mandatory state-run pension system, and as the population continues to live longer, it puts more and more pressure on the system. The 2008 recession pushed the system to the brink, and this year its shortfall is expected to reach €32 billion ($44.72 billion). This year alone the system has lost $15 billion. If the government was to leave the system as is, the deficit would increase tenfold in the next forty years. It is entirely possible that this reform will not be enough to resolve all of the problems with the pension system and the government will have to make additional reforms.

In spite of the necessity of pension reform, the public response towards Mr. Sarkozy's proposal has been turbulent. Protests and strikes have disrupted day-to-day activities across France for six weeks. Unions argue that rather than raise the retirement age, Mr. Sarkozy should increase corporate taxes. However, France's tax rates are among the highest in the world, while the country's retirement age is among the lowest. (Compare France's 60-year-old retirement age with the retirement age in the United States, which is 66, and the European Union average of 64.)

Nevertheless, the protests have continued to gain intensity. Workers have gone on strike at all of France's 12 oil refineries, resulting in serious fuel shortages. Because of these shortages, France had to cancel one-third of all incoming and outgoing flights from French airports last Tuesday. Truck drivers joined the protests as well, conducting "snail operations," a tactic where the truck drivers drive very slowly in order to slow down traffic. High school students have also joined the protests, and classes were disrupted or cancelled at between five and ten percent of French high schools.

The rioting has also led to several incidents of violence. In Lyon, for example, police resorted to tear gas when protestors looted stores and set fire to cars. The Interior Ministry reported that approximately 1,500 people have been arrested. But Sarkozy vows to see his proposed reform through, and a vote is expected to take place next week. France "loves a good demonstration," and social protests have become a part of their culture. France's Prime Minister, Francois Fillon, said that the protests will taper off once the law is in place, as has been the case with other pension reforms passed in the 1990's and 2000's that saw similar protests prior to becoming law.

Discussion Question: Is the proposed pension reform reasonable, or do French citizens have good reason to be protesting?
Do the French earn the right to early retirement by paying such high taxes during their working years?

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