Compared to other items on the budget, pensions are particularly hard to adjust, said Hippolyte d’Albis, an economist and professor at the ESSEC Business School.
“It’s an expenditure that is binding on society because the parameters that determine it — most notably the annual indexation of basic pensions — are set by law and can only be changed by passing a new law,” he said.
In 2024 the national deficit stood at 6.1 percent of GDP — double the 3 percent allowed under the EU’s fiscal rules. Paris forecasts that the deficit will not fall below 3 percent until 2029.
Economy Minister Éric Lombard suggested things could get bad enough to require the International Monetary Fund (IMF) to bail the country out — treatment usually reserved for financial basket cases like Argentina. He backtracked a few hours later after a large wobble in the stock market.
François Bayrou wants to force through €43.8 billion worth of budget cuts to bring French spending under control. | Christophe Petit Tesson/EPA
The markets are already well aware of France’s troubling fiscal trajectory; the country has already had its credit rating cut by the major credit ratings agencies. It’s now a stone’s throw away from seeing its borrowing costs surpass those of Italy, long a byword for reckless spending and unsustainable debt.
France’s pensions system is unbalanced, but in demographic terms the country is actually a lot better off than many of its peers, with the second-highest fertility rate in the EU, at 1.7 births per woman. Italy and Spain, for example, face an even more stark fiscal cliff as the population ages, with only 1.1 to 1.2 births per woman.
“France is the developed country where the standard of living in retirement is the highest compared to the average standard of living of working people,” said Thierry Pech, director general of progressive think tank Terra Nova. He said that raising the working age, which France has already done, is in some ways the “most brutal method.”
“It wouldn’t be unfair to involve the wealthiest retirees,” he said. “But it would require a bit of political courage and a lot of education.”