REFORMING FRANCE / PROJECT SYNDICATE

Reforming France

Jean-Marc Ayrault

JAN 7, 2014
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PARIS – Before this year has ended, the French parliament will have enacted a comprehensive pension overhaul, which is essential not only to putting France’s public finances on a sound and sustainable footing, but also to shoring up confidence in the eurozone in 2014 and beyond. Moreover, how the reform was carried out is as important as the measure itself.

France has more favorable demographics than most other European countries. Nonetheless, further effort was needed to strengthen the pay-as-you-go pension system by the equivalent of one percentage point of GDP. The contribution period will therefore be increased gradually, reaching 43 years in 2035.

This effort has gained broad public acceptance because it was fair: both retirees and working people will contribute, as will companies and households. Financing and social needs alike have been taken into account, while the drawbacks of the current system will be addressed, benefiting women, people who have experienced non-continuous careers, those with particularly strenuous occupations, and low-income retirees.

Most important, for the first time, pension reform has been carried out in France in continuous consultation with employers’ associations and trade unions. Many people were expecting a showdown. Instead, an atmosphere of constructive negotiation prevailed.

In other words, the key to success has been justice, balance, and social dialogue. In September, a leading European Union official said of a proposed measure, “This is a French-style reform!” Regardless of whether it was intended as a criticism, I considered it a compliment. Some in Europe think that the only good reform is one that hurts. This is not my vision: yes, modernization is needed in the context of a changing world, but it does not have to be divisive.

The challenge for Europe is to advance without falling apart. That means providing Europe’s citizens with a renewed sense of hope and opportunity. France has been actively helping to stabilize the eurozone by encouraging structural progress, such as the establishment of a European banking union. We also need to strengthen social cohesion on the continent. That is the whole purpose of solidarity-based integration, as called for by President François Hollande.

The European Council’s revision this month of the Posting of Workers Directive, which applies to employees who are sent temporarily to work in another EU member state, is a good start. But we have to go further. The establishment of an EU-wide minimum wage would send a strong signal to citizens that Europe is a social reality.

In France, after ten years of decline in export markets, my government has embarked on a bold strategy to restore our country’s competitiveness. This year, we implemented a reduction of social-welfare taxes that will amount to around one percentage point of GDP when phased in fully by 2016. France has also undertaken ambitious reforms to reduce job-market dualism and give greater flexibility to employers as well as greater security to employees.

Moreover, the upcoming pension reform caps 18 months of significant steps toward fiscal consolidation that have improved the effectiveness of public spending while financing our priorities: education, the transition to a less carbon-intensive economy, employment, health care, and security. Our efforts have been unprecedented, resulting in deficit reduction amounting to 1.5% of GDP in 2012, 1.7% in 2013, and an estimated 0.9% in 2014. By 2015, deficit reduction will rely entirely on spending cuts.

While we have responded to emergencies in this period, we have not sacrificed our ability to push through more reforms in the future. Indeed, the restoration of social dialogue as a tool with which to forge long-lasting consensus represents a deep cultural shift that augurs well for such efforts.

Many of these efforts are already underway: comprehensive reform of vocational training, a framework for adopting new sources of energy, and, last but not least, a complete overhaul of our tax system in favor of job creation and growth.

Ultimately, we will be judged on the basis of our reforms’ economic efficiency and social fairness. Our task is to demonstrate our ability to reform government, offer high-quality public services – for example, education and health care – for all at a reasonable cost, and control public spending in order to restore our ability to reduce taxes without impeding debt reduction.

My ambition is the creation of a “new French model” that places sustainable solidarity at its center, with all citizens aware of what they owe everyone else. Such a model – in which government empowers private initiatives and is dedicated to smoothing the major economic and environmental transitions of our time – offers opportunity for all, while relying on the power of collective action.

It is thanks to these values, to the acute consciousness of what individual and collective strengths can achieve in tandem, that France has always found the necessary resources to rebuild and modernize. By being true to ourselves, and open to the world, we will make our voice heard in Europe and beyond.


Jean-Marc Ayrault is Prime Minister of France.