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| Tuesday, July 22, 2014



France’s pension failure





AU students must recognize that the U.S. cannot continue to push the limits of platinum union packages. France is a caricature of America’s struggle to rein in finances critical to healing a recovering economy. France’s parliament is once more moving to make the private sector pay up, which does not sound too different from U.S. Congress.

If a U.S. politician guaranteed perks while raising taxes, chances are that the public would slaughter him or her at the polls. In Europe, the playbook is different: perks – particularly the benefits of France’s pension system – are handed away while seldom confronting the issue of debt or deficits.

President François Hollande is once again in the middle of a rightist-leftist conflict concerning the underfunding of France’s retirement system. The New York Times gathered the current number at $12 billion dollars. This is unarguably a fraction of American debt, over which labor unions do not shed a tear.

Jean –Paul Fitoussi, an economics professor at the Institut d’Études Politiques, highlights the government’s attempt at sidelining the issue. Fitoussi believes alterations will not really upset anyone. Like most government programs, the private sector pays a certain amount in taxes to maintain them.

Tax increases will typically be the primary incubator behind the program, but will be too small to shock the private sector for the time being. The left is retaliating because the mandate that public sector employees contribute, for the first time, creates penalties in order to receive the full package.

“Everything is being done in homeopathic doses,” asserts Fitoussi in a New York Times article. Given how little current plans for reform deviate from past plans, his observation carries credence.

The proposal has yet to reach the liberal parliament, and supporters may brainstorm additional checks in getting most out of favorable legislation. Regardless, both chambers will hear testimony, which will undoubtedly be heard by both die-hard union advocates and skeptics of the bureaucracy.

Opponents are unhappy, as they contend it will deepen the country’s already shaky finances. By 2020, the projected deficit for pensions is expected to reach $28 billion. Making matters worse, similar to Social Security – in which longer lives hinder retirement systems’ operability – France could face the same age dilemma. Fortunately, the European Union is riding French officials to implement foundational changes, which do not include tax increases.

France’s Prime Minister Jean-Marc Ayrault is clueless.“The French are attached to their pension system – but how could they not be?” Ayrault said in the article.

This is frightening reality. A casual observer with better diction would smartly say that France is being “destructive” with its entitlement attachment.

Marshall Bornemann is a junior in the School of International Service.