France: France To Pay For Pension Deficit With Higher Payroll Taxes
30 August 2013
Posted by: Author: Ulrika Lomas
Author: Ulrika Lomas
France is to "preserve" the "heritage" of its pension system by increasing payroll taxes, the Prime Minister has said.
Jean-Marc Ayrault emerged from intensive talks with industry representatives with plans for what he called "responsible" reform.
The deficit in France's pay-as-you-go (PAYG) system is expected to hit EUR20.7bn (USD27.7bn) by 2020. To compensate, employers and employees will have to pay more in contributions, with rates to rise by 0.3 percent in 2017. This will equate to roughly EUR4.50 a month for a worker on the minimum wage.
Many will also be affected by what effectively amounts to a change in the retirement age. The minimum number of contribution years required for a worker to receive a full pension will rise from 41.5 years to 43 years by 2035.
"It will lead little by little to a rise in the effective age of retirement and it is because of this that this is a major structural reform," Ayrault said.
The initiative was immediately condemned by Pierre Gattaz, head of France's employers' confederation. He called the reform "dangerous" and unacceptable, telling Le Figaro that "all the Government does is tax and then tax some more."