Nowadays, France is struggling with many economic issues. The EU has given France a time frame to fix its budget gap problem. For this purpose, the French government is looking closely at the crucial issues of pensions to tackle the big budget gap complexity. Barnier’s administration wants retirees to help cut costs, despite the fact that lawmakers usually support older voters. According to experts, baby boomers need to accept cuts to their pensions. This cut makes up over 25% of the government’s yearly expenses.
Now the question is: which generation are the baby boomers? All people born between 1946 and 1964. The involvement of this generation in the financial adjustments is necessary, especially if the government wants to effectively reduce its spending. To save money for the 2025 budget, Barnier’s government wants to delay a planned increase in pensions. This increment is connected to inflation and was set for January. Now this plan will be shifted to mid-next year. This delay would stabilize France’s economy to some extent. It saves about 4 billion euros (around $4.4 billion). It is also asking retirees to share the financial burden during tough economic times.
However, the government’s proposal to cut pension expansion has brought a strong reaction from other political groups. They worry about pensioners, a majority voting group. A far-right leader, Marine Le Pen, strongly opposes this plan and calls it “stealing billions from our elders”. Additionally, former interior minister Gerald Darmanin said it was absurd.
How to solve France’s economic issues?
Despite this criticism, many economists believe that the implementation of this strategy is necessary to address France’s economic issues. Because France has high public spending, which is about 57% of GDP. Former auditor François Ecalle highlights that it is a risky challenge to cut spending without looking at pensions. President Macron has also made an attempt in the past to save on pensions. For this purpose, he raised the retirement age to 64, but this move did not prove helpful.
The pension system relies heavily on workers’ contributions, putting pressure on the system as the number of pensioners grows compared to the working population.
Due to the baby boomer generation, France is facing growing problems with debt. The young generation who pay taxes feels frustrated. According to them, boomers are not participating in solving France’s financial crisis. Entrepreneur Rafik Smati and the satirical account “Costa Boomer” both criticize wealthy retirees while younger people struggle.
The new prime minister is under tough conditions to tackle the growing pension crisis. He suggested reversing the pension increases if lawmakers could find enough savings. However, other ideas such as cutting subsidies or reducing public broadcaster funding don’t prove beneficial to save money.
According to economists, one of the costly mistakes was the announcement of raising pensions in January. It is costing France nearly 15 billion euros every year. This decision erased the savings made by pushing the retirement age higher. Many now believe this was one of France’s worst economic decisions in recent years.
In France, pensioners are more important than working people. They are protected from inflammation. At the same time, the pay package of workers is not too high to meet the regular expenses. It means France provides better living standards for pensioners but ignores the rights of working people. While in other nations, pensioners usually live with less.
French pensioners also retire earlier and live longer than people in other OECD countries. Because of this, France spends almost 14% of its GDP on pensions, while other countries spend about 8%.
In June, the National Pensions Council stated that the pension system has fallen into deficit this year and will continue losing it unless some mandatory changes are made.
Economist Sylvain Catherine from the Wharton School says France may have to raise the retirement age to keep the pension system working well, just like other countries have done.
