IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
The first significant policy move from the newly elected president is the repeal of part of his predecessor’s pension reform. As promised during the electoral campaign, President Hollande is bringing the legal age for retirement back from 62 to 60 years for those who started working at an early age. According to the French employer’s association MEDEF, this will lead to a 0.5% increase of the social contributions paid by employees.
Could it be that France is on its way to defy mathematics by trying to combine one of the highest level of life expectancy in the EU (81 years) with the lowest retirement age (60 or 62) while sticking to a fully pay-as-you-go system? So far, the socialist party sees no reason to worry. It insists that the cost of this reform is likely to be below initial estimation - it will weight down the French budget by only € 2 billion yearly, instead of € 5 billion. Strangely, this is considered as a "gain" by socialists and the media who apparently forgot that France don’t have that money and will therefore have either to borrow it, thereby increasing public debt, or tax it away from the private sector.