Last Thursday the French government increased the official retirement age by 2 years as part of a reform to the nation’s pension system that has been long delayed. In 2019, the decision prompted labor unions to call for strikes. The unions had vowed to disagree with the new law.
New legislation now requires French citizens to continue working until they are 64 years of age, instead of 62. According to Elisabeth Borne, the Prime Minister, the higher retirement age will solve a pension funding deficit. She said she knew that changing the pension system brought about fears and questions among the French citizens, but added that it would be inexcusable to allow the deficit to grow.
When announcing the plan, the French government claimed that without some type of reform, the budget might accumulate an annual deficit of almost $20 billion by 2030. President Emmanuel Macron said that reforms were necessary to avoid financing the country’s retirement system on credit.
Bruno Le Maire, the Finance Minister stated that the proposed reform could bring about $19 billion (€17.7 billion) yearly by 2030. Bruno also announced other changes including raising the minimum monthly pension allowance. She stated that people who started working before they attained the age of 16 have the right to retire at 58. Beginning in 2027, people can receive full state pension benefits if they have worked for 43 years.
France spent more funds than many other nations on state pensions at about 14 percent of GDP in 2018. According to Eurostat, in 2019, the country had the highest welfare spending compared to other countries in the European Union at about 34 percent of GDP. The French government argues that changes are required to ensure that the system is financially sustainable.
Government agencies are predicting that massive deficits will occur in the coming years as baby boomers continue to retire. Therefore, they must make changes fast to avoid losing money to invest in other things. By increasing the retirement age to 64, France will remain below the norm in Europe and most other developed countries where full pension benefits apply at age 65 and are moving towards 67.