France to raise retirement age from 60 to 62

By SYLVIE CORBET and JEAN-MARIE GODARD Associated Press Writers

PARIS (AP) - France will raise the retirement age from 60 to 62 in 2018 in an effort to get the country's spiraling public finances under control, the labor minister said Wednesday.

Eric Woerth called the measure - already strongly opposed by the opposition Socialist Party and labor unions - a "real moral obligation," given France's burgeoning deficit and its aging population, which he said threatens the viability of the money-losing pension system.

The French budget deficit was at 7.5 percent of gross domestic product last year. The conservative government has vowed to bring it under 3 percent - the threshold set by the European Union - by 2013. The Greek crisis has given added urgency to France's plans to cut back.

Woerth said the reform will bring France more into line with other European countries, which have raised retirement ages and taken other measures to slash budget deficits.

Still, the French measure pales in comparison with more drastic changes elsewhere in Europe. Germany, for example, is to gradually raise its retirement age from 65 to 67, starting in 2012 and wrapping up in 2029.

"There is no magic in terms of pensions. We cannot at the same time promise to work less long and not have a deficit," Woerth told journalists. "If we want end our pension system's debts, working longer is unavoidable."

The reform will save nearly euro19 billion ($29.3 billion) in 2018 and should bring the pension system back into the black that year, Woerth said.

He pledged the measure will be "responsible and fair," affecting workers in the public and private sectors in equally. It also makes exceptions for people who had physically tough jobs that took a toll on their health, as well as people who began working young, before age 18. They can still retire at 60.

The reform is to be instituted progressively and will also stretch out the total number of years people have to work to win full pension payments.

Several unions said that aspect of the reform will unfairly penalize women, who often spend more time out of the work force raising their children. The UNSA union said that under the new reform, people in such situations won't be able to retire until age 67 if they want full benefits.

The Cabinet is to discuss the proposals in July, and they are expected to go before parliament next autumn.

Even before Wednesday's announcement, the measure had sparked angry reactions from Socialist lawmakers and unions. On Tuesday, tens of thousands of people marched through Paris to protest the plans. Larger protests and strikes are likely starting in September, once much of the country returns from summer vacation.

For many on the left, chipping away at France's cherished social benefits seems unthinkable.

"The end of retirement at age 60 ... is the end of an era," leftist politician Jean-Luc Melenchon told France-Info. "It's the end of a way of life, and the end of happy days."

Last month, President Nicolas Sarkozy announced that tackling 30 years of accumulated deficits is now a "national priority." Other recent measures aimed at getting the deficit under control include a three-year spending freeze and a crackdown on tax loopholes.

Pension reform have been an issue throughout Europe, where generous welfare programs have been taken for granted - though the economic crisis has left some benefits looking more vulnerable.

A leading economic agency urged the Netherlands on Wednesday to reform its generous retirement policy to keep people working longer and accept a smaller pension when they quit.

The Organization for Economic Cooperation and Development, a watchdog for 31 of the world's richest countries, said Dutch pension funds are in danger of becoming insolvent, with retired workers living longer and fewer workers entering the labor pool.