PARIS (Reuters) – France cannot afford not to reform its pension system and it should look at how to get people working for longer and make changes to how pensions are indexed to inflation, the independent audit office said on Thursday.
Prime Minister Francois Bayrou has tasked the Cour des Comptes with analysing how the pension system weighs on the competitiveness of the euro zone’s second-biggest economy.
He commissioned the report to shape a debate underway among employers’ federations and unions on how to revise an unpopular 2023 reform that gradually raises the pension age to 64 from 62.
State pensions are an explosive issue in France and audit office head Pierre Moscovici was careful not to make explicit recommendations, although he highlighted that working longer and tweaking the pension link to inflation would yield results.
“The status quo for the financing of the retirement system is impossible, or at least is insufficient to keep the system sustainable in the medium and long-term,” he told journalists.
France spends the equivalent of 14% of economic output on pensions, 2.5 percentage points above the euro zone average and financed almost exclusively by hefty payroll contributions and tax revenue, increasing the cost of labour and the fiscal burden.
Moscovici, a former Socialist finance minister, said the system’s impact on France’s competitiveness was mixed but he acknowledged that it added to the cost of labour.
He said pushing back the age at which people retire would boost France’s employment rate, which is particularly low for people over the age of 55 compared with other euro zone countries.
Moscovici also said that at least partially indexing pensions to wages rather than only inflation would ensure that retirees were exposed to the same economic risks as workers.
French retirees’ pensions rose in step with sharp increases in inflation in recent years while workers salaries often lagged.
(Reporting by Leigh Thomas; Editing by Hugh Lawson)
