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Can This Man Fix France's Pensions?


Jean-Pierre Raffarin, France's pudgy, self-effacing Prime Minister, doesn't look like star material. While his counterparts Tony Blair in Britain and Gerhard Schr?der in Germany are their countries' undisputed leaders, Raffarin plays second fiddle on international affairs to President Jacques Chirac. Even at home, he's often overshadowed by Cabinet members such as Interior Minister Nicolas Sarkozy. But Raffarin could soon prove himself a hero of economic reform in Europe, if he can push through his plan to overhaul his country's creaking retirement system.

The Prime Minister is off to a good start. His plan, to be presented to the National Assembly in June, would scale back pension schemes for government workers to match those in the private sector, and gradually lengthen, from 37.5 to 42 years, the period that both public and private employees must pay into the pension system to qualify for full benefits. It's something that needs to be done, and fast. In less than 20 years, France's fast-growing retiree population will equal the size of its active labor force, and the nation's pay-as-you-go pension system will be running a deficit of $57 billion a year. The last serious pension reform effort, in 1995, was derailed by nationwide strikes, and the unions are hoping for a repeat.

Those unions are dead set against change. On May 13, striking unions shut down public transportation, schools, and mail delivery across much of France in a protest against Raffarin's proposed reform. So far, Raffarin shows no signs of caving. He vows to stand firm on the essentials of his plan, while saying he is open to some compromise. As he sits down to negotiations with unions over the next few weeks, he's in a strong bargaining position, and not just because his center-right forces hold an absolute parliamentary majority. Raffarin, a veteran politico who once was a marketing executive, has worked skillfully to win public support. Before the strike, he ran advertisements in national newspapers warning that "If we do nothing today, in 20 years our pensions will be cut in half." Polls show that at least two-thirds of voters agree with the broad outlines of his plan. Raffarin also has forged surprisingly cordial relations with moderate labor leaders, who now are resisting calls from more radical unions for prolonged strikes.

The fight has just begun, but if Raffarin prevails, France would be the first major Continental country to have successfully tackled one of the region's most urgent economic problems. And Raffarin might finally get the recognition he deserves.


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