France’s battle for reform: Is it a turning point?

Date: 28/06/03

Will the government's victory over pensions mean reform elsewhere?

ECONOMIC reform follows a time-honoured ritual in France. The government proposes change. The public sector takes to the streets. The government backs down. So why is Jean-Pierre Raffarin, the French prime minister, trying hard not to appear smug after the fiercest period of strikes, in response to his proposed pension reforms, that France has witnessed in years? Has the hitherto-timid French government hardened into a steely instrument of long-overdue structural reform?

The reason for Mr Raffarin's self-satisfaction was the crumbling last week of the strikes. After over a month of chaos, with teachers, train drivers, postmen, tax-inspectors, hospital workers and more periodically bringing France's big cities to a standstill, last week's effort collapsed. Trains ran; school exams took place. Only days before, tens of thousands of people, assembled by word of mouth and by the internet, had gathered in Paris - to urge the government not to give in. “No to the blockage of our country by a few unions!” cried Edouard Fillias, one 24-year-old organiser, “No to the conservative spirit that paralyses reform!” Although parliament has yet to pass the new pension law, the government's crushing majority there makes the vote a formality and the reform now a certainty.

How has Mr Raffarin pulled this off? Three factors stand out. First, unlike Alain Juppé, a former conservative prime minister who in 1995 also tried, but failed, to reform public-sector pensions, Mr Raffarin has proved a subtle communicator. His carefully cultivated mix of provincial blokeishness and unpompous humility has gone down far better than the imperious style of Mr Juppé. Mr Raffarin has gone out of his way to consult and to appear to listen. Even with the reforms all but in the bag, Mr Raffarin resisted the temptation to look triumphant this week, and said that he would spend this summer “on the ground, talking to ordinary French people, to listen to the conclusions they draw from the national pension debate”.

Second, the government, somewhat belatedly, managed to wrap its proposed reforms in the sort of appeal to “social solidarity” that plays well in France. The French consider their pay-as-you-go pension system, whereby existing workers directly finance the pensions of their elders, a badge of the social cohesion between generations that is supposed to hold the country together. Any loss of privilege is viewed with deep suspicion. President Jacques Chirac recently put his weight behind his prime minister, urging reform so as to “preserve that which holds us together, that which cements our society”. For his part, Mr Raffarin wrote to every household, appealing to the need “not to defer the problem to your children”. It may have been tempting, politically, to hold off. But the prime minister persuaded people that, this time, there was no alternative.

A crafty operator

The third success was tactical. Early on, Mr Raffarin managed to peel one of the big trade-union groups, the CFDT, away from the others. That success was critical in dividing the union-led opposition and ensuring that basic public services ran. He then carefully chose his moment to harden his stand against the demonstrators, declaring that public employees would have pay docked for days they went on strike.

Symbolic as this victory is, does it mark the beginning of a determined reformist government in France? Possibly, but don't count on it. For a start, one reason for the success of this pension reform was that it was less ambitious than Mr Juppé's - as the former prime minister pointed out, with grudging respect, at the governing party's congress at the weekend. Its main purpose is to lengthen from 37.5 to 40 (and later to 42) the number of years public-sector employees must work to get a maximum pension, bringing them into line with private-sector employees. This is supposed to secure the financing of pensions until 2020.

The reform does not, however, even touch certain public-sector workers, such as railwaymen and employees of the electricity and gas utilities, who are covered by special schemes. Nor, by keeping the pay-as-you-go system, does it resolve pension finance for the long term. “It's a major step in reforming the French system,” says Eric Chaney, an economist at Morgan Stanley, “but, because it assumes an optimistic level of unemployment, there's still likely to be a funding shortfall within ten years.”

Moreover, the unions are already promising a comeback in September, when the government's next round of reforms - of health insurance, along with the deferred reform of education - is due. These touch reforms for which public opinion has not been softened by years of debate, as it was over pensions. And, already, Mr Raffarin's popularity has dipped during the pension battle. His resolve will have been stiffened by his triumph. But the unions, smarting from defeat, will be steeling themselves for the next round.

Will the government's victory over pensions mean reform elsewhere?

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