French Senate passes Sarkozy Bill to Raise Retirement Age to 62

About 1.1 million demonstrators marched in more than 250 rallies across France Oct. 19, police estimated, up from 825,000 in the last national strike on Oct. 12. Photographer: Bertrand Guay/AFP/Getty Images

story by Bloomberg
written by Helene Fouquet

France’s Senate approved President Nicolas Sarkozy’s bill to raise the retirement age by two years as labor unions promised to maintain their protests for an eighth week against the measure.

Lawmakers in the Sarkozy-controlled upper house of Parliament voted 177-153, clearing the way for final passage. A comparable version of the legislation was approved by the National Assembly on Sept. 15. A committee comprising members of both chambers is scheduled to meet Oct. 25 to merge the bills.

“It’s not by looking back at the past that we’ll be able to maintain our social model,” Labor Minister Eric Woerth told senators as the debate closed today. “One day, adversaries will look up to Nicolas Sarkozy’s performance.”

Senate passage of the bill won’t quell opposition to the plan to raise the retirement age to 62 from 60 and the age for a full pension to 67 from 65. Protests have disrupted transport and shut oil refineries, leading to fuel shortages.

“We will never accept it,” Jean-Claude Mailly, secretary general of Force Ouvriere, said today on RMC radio. “Just because a law has been voted through doesn’t mean we just say: ‘Oh, too bad.’”

Sarkozy has refused to retreat from the plan that would bring France closer to Germany and the U.S., which are moving toward setting 67 as the full-retirement age, according to the Organization for Economic Cooperation and Development.

The retirement overhaul is needed to balance the pension system’s budget by 2018, Sarkozy says. The changes are part of his effort to reduce the total deficit. This year, the gap will stand at 7.7 percent of gross domestic product and Sarkozy plans to cut it to 6 percent next year.

Risk Premium

Since the unions’ first protest strike, the risk premium on French bonds has increased. Investors demand 40 basis points more to buy 10-year French bonds than comparable German securities, against 30 basis points on Sept. 6.

Union spokesmen and the opposition Socialist Party said the law should not be enacted and demanded the government craft a new pension overhaul plan. Violence broke out at protests this week, prompting Sarkozy to threaten a crackdown on “rioters.”

Sarkozy also ordered striking staff at Total SA’s Grandpuits refinery southeast of Paris, one of the 11 that have been shut in protest strikes, back to work.

“There is a right to strike but there is no right to prevent people from working and traveling,” Energy Minister Jean-Louis Borloo said today on BFM television. He said about 20 percent of the country’s service stations were dry.

Speeding the Vote

Seeking to mute the disruptions, the government moved to speed parliamentary passage of the bill, invoking a rule that allows the Senate to cast a single vote on the legislation and 200 remaining amendments.

“See you at the next elections,” Socialist Senator Jean- Pierre Bel told the majority Union for a Popular Movement in the closing debate today. “What you are doing with pensions is going to stick to you like glue.”

The overall impact on France’s economy “for the moment is not significant,” Laurence Boone, an economist at Barclays Capital in Paris, said in a note to clients.

A 22-day strike in 1995 cut 0.2 percentage points from GDP for one quarter. “To date, there have been only a few days of strikes, and these were not observed 100 percent” thanks to a law that ensures minimum service levels in key industries and that didn’t exist in 1995, Boone said.

The French Chemical Industry Union said in a statement it is losing “100 million euros ($140 million) a day” because of the strikes, without giving details.

Air France has lost 25 million euros in revenue. Thierry Gregoire, president of hotel federation UMIH, said on BFM that cancelations are running 50 percent above normal.

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To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net  
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net