PARIS, (Reuters) – France’s government said yesterday it would raise the retirement age and increase taxes in a reform aimed at salvaging the nation’s indebted pensions system and safeguarding its sovereign debt rating.
Unions promised to fight President Nicolas Sarkozy, saying the move to raise the minimum retirement age gradually to 62 from 60 by 2018 represented a “brutal” assault on worker rights.
Under the plan, the government said it would lift the tax bracket for top earners by one percentage point from 2011 and impose a wave of new levies on capital gains, stock options and other investment income to help plug the pension shortfall.
Sarkozy hopes the reform will show investors he is serious about bolstering public finances, with the deficit set to hit a record 8 percent of gross domestic product this year, and enable France to cling to its prized AAA sovereign debt rating.
France is the latest of several EU countries to draw up ambitions reform plans as the 27-nation club struggles with a growing debt crisis that has spooked global financial markets.
The French pay-as-you-go pension system is forecast to register a deficit of 32 billion euros ($39 billion) this year. By 2050, with people living longer, the shortfall is expected to swell above 100 billion euros.
“There is no magic trick when it comes to pensions,” Labour Minister Eric Woerth told reporters, saying only comprehensive reform could balance accounts by 2018.
“We cannot ignore the fact that the French population is ageing. We cannot ignore this fact. Our European partners have done this by working longer. We cannot avoid joining this movement,” he said.
The pensions package is due to go to parliament for ratification in September and unions have already announced a day of protest on June 24, hoping to build momentum for major, nationwide strikes following the traditional August holidays.
