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Close But No Cigar!
Angela
Charlton of the Boston Globe reports, French
prime minister urges big cost-cutting:
France's
Prime Minister Francois Fillon on Friday rebuffed unions angry over
plans to raise the retirement age by two years, urging the French to
show "courage" and make an unprecedented effort to cut the enormous
national debt.
The government said Friday it's considering freezing
public sector salaries for the next three years -- a prospect that
prompted unions to slam the door on salary talks with the labor
minister in protest.
Unions are energized after nationwide
strikes and protests Thursday that brought nearly a million people to
the streets to protest President Nicolas Sarkozy's bid to reform a
money-losing pension system. The reform includes raising the retirement
age from 60 to 62 -- which would still be among the lowest in Europe.
Fillon defended the pension reform at a news conference hastily
arranged after Thursday's protests.
Fillon said he "understands
the worries" of workers, but added, "We must break the spiral of
indebtedness. ... We need a bit of courage."
He carefully avoided
using the word "austerity," saying it was too soon to impose cutbacks
like the more sweeping ones introduced in Germany or some other
European countries.
He spoke as Sarkozy and Finance Minister
Christine Lagarde were heading to Canada for meetings of the G-8, or
Group of Eight, and later the G-20, or Group of 20 leading world
economies.
A key subject at the discussions will be how to revive
the world economy after global financial meltdown, and how much and
how fast to cut government spending.
Lagarde
said on France-Inter radio Friday that France's pension reform is the
government's way of "trying to send a message of security to the
markets" about France's commitment to cutting its debt.
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.
Fillon
insisted that the pension reform and other cost-cutting would not
threaten to slow the economic recovery, and reiterated forecasts that
the French economy will grow 1.4 percent this year after contracting
2.5 percent last year.
Fillon said the retirement reform will
save nearly euro19 billion ($29.3 billion) in 2018 and should bring the
pension system back into the black that year.
Unions say money for the pension system
should come from higher taxes or charges on those who are still
working, and see cost-cutting in the pension system as an attack on a
hard-fought way of life. The government says that given rising life
expectancy, workers must retire later.
Unions have long feared
that public sector salaries could be targeted in cost-cutting measures,
and the government confirmed Friday that a 3-year salary freeze is on
the table, according to Jean-Marc Canon, head of the CGT-Fonction
Publique union.
He was part of salary talks with Labor Minister
Eric Woerth on Friday that ended in a union walkout.
Feeling
the heat, French president Nicolas Sarkozy said cigars
are out and perks will be cut ahead of austerity measures:
Parliamentary
pensions, a lavish Bastille Day garden party and ministers’ Cuban
cigars are to be sacrificed in the name of economic recovery as the
French government seeks to show that ministers are sharing the pain of
their austerity drive.
With his government attempting to raise
the retirement age and bracing people for cuts of €45 billion in public
spending, president Nicolas Sarkozy has said ministers must lead by
example and reduce their own budgets. France has not yet set out a
detailed austerity package, but the national auditing office recently
called for urgent moves to trim the deficit.
It is widely
believed that Mr Sarkozy will cancel the traditional July 14th garden
party at the Elysée Palace, an annual event that was attended by 7,000
people last year and cost more than €700,000.
Ministers are also
to be ordered to cut the number of people employed in their cabinets
(private offices), while a reduction in the number of ministers is
expected in the next reshuffle.
The
government’s belt-tightening follows a series of damaging revelations
about ministers’ extravagant lifestyles and waste of public money.
It
was reported this week that prime minister François Fillon had asked
junior minister Christian Blanc to reimburse the state €12,000 of
taxpayers’ money which was used to buy expensive cigars.
Le Canard
Enchaîné, which has specialised in publishing details of ministers’
expenses, had published receipts from a Paris cigar shop for high-end
Cuban brands that were billed to the government.
Mr Blanc, a
former head of Air France who is now junior minister for the greater
Paris area, blamed a staff member for the purchases and has already
reimbursed €3,500 for those he had smoked.
Further embarrassment followed when it was revealed that
Christine Boutin, a minister sacked last year by Mr Sarkozy, was still
earning €18,000 a month from the state thanks to a parliamentary
pension and a special “mission” from the president to write a report on
globalisation.
Ms Boutin said she would keep the pension and
give up the € 9,000 a month for the report.
The Boutin
controversy then led to five ministers who were drawing a parliamentary
pension being ordered to forego them as long as they served in the
cabinet.
Until recently, the generous perks and privileges given
to France’s ruling class had attracted relatively little scrutiny, but
the economic crisis, public disquiet and regular leaks have shone a
harsh light on the system.
Two months
ago, Mr Fillon ordered ministers to take only commercial flights after
his state secretary for overseas development, Alain Joyandet, spent
€116,500 chartering a private jet to attend a conference in Martinique.
Another
perk in peril is the free Paris flat that goes automatically with
cabinet rank, whether needed or not.
That one hit the headlines
when industry minister Christian Estrosi was revealed to be occupying
rooms at the Economics Ministry in eastern Paris while lending a
relative his official apartment overlooking the Eiffel Tower on the
other side of the city.
Fadela Amara, state secretary for urban
affairs, admitted this month that family members sometimes used her
official apartment in the same upmarket district while she stayed in her
own more humble flat in a working-class part of the city.
The
revelations about ministers’ royal-style perks have been especially
damaging because they coincide with the government’s attempts to prepare
the public for severe spending cuts.
Didier Migaud, the head of
the national auditing office, said savings of €45 billion would be
needed and that the government would be required to take a “very sharp
turn” on public finances.
France, alone among the biggest European
economies, has yet to set out details of a savings plan, but a
spokesman for Mr Sarkozy said measures would be outlined in the coming
weeks.
What are those French ministers The reform cuts benefits, curbs "We inherited a "It is our responsibility to save the country from The ruling socialists face a battle over the "The draft pension bill ... is By "We The socialist party has 157 of 300 seats Analysts see the And
smoking? Meanwhile, Reuters reports that the Greek
government agreed on Friday the most radical
shake-up of its pension system in decades to avert bankruptcy and
satisfy foreign lenders despite fierce opposition at home:
widespread early retirement, increases the number of contribution
years from 35-37 to 40 and raises women's retirement age from 60 to
match men on 65.
pension system which had collapsed and we are fixing it," Labour
Minister Andreas Loverdos told a news conference after the cabinet
approved the cuts.
bankruptcy."
reforms, agreed as part of a 110 billion euro ($147.6 billion) emergency
loan package from the EU and IMF. Most voters oppose the reforms and a
strike on June 29 will gauge the strength of public discontent as
lawmakers start debating the bill.
slaughtering fundamental pension rights," public sector union ADEDY said
in a statement.
contrast, the EU Commision in Brussels praised the overhaul as
respecting the loan deal.
welcome it as a major step towards improving the sustainability of
public finances," spokesman Amadeu Altafaj Tardio said.
in parliament and the reform is likely to pass despite some criticism
from its ranks.
Greek pension reform as a test case. It goes beyond tax increases and
public wage cuts to tackle a sector which epitomises many of the woes
that have caused the country's downfall, including tax evasion, red
tape, selective privileges and delayed reforms.
if you think things are bad in Greece and France, here comes Romania
where protests
are taking place over pension, wage cuts:
Hundreds of people were protesting Friday in the
Romanian capital over cuts to public wages and pensions, the spokesman
for the country's president said.Unions said there
were 600 people outside the presidential palace, but the spokesman said
there were about 400.
Anti-riot police had to stop about 25 or
30 people who went past the barricades, spokesman Valaureu Turan told
CNN.
Prime Minister Emil Boc recently
announced a 25 percent cut in public sector wages and a 15 percent cut
in pensions. The Constitutional Court of Romania ruled Friday that part
of the laws are not constitutional, so the government will have to
decide on the next step, Turan said.
As you can see, the
global pension war is spreading fast. Change is
brutal and workers are angry. Who can blame them? They're seeing
banksters get away with billions in bonuses and bailouts, and now that
the pension Ponzi is running out of money, they're stuck having to work
longer to make up for the shortfall.
As for the capitalist ruling class pushing these reforms, they're all
saying 'close but no cigar'. If Marx were alive today, he'd be pouring
over pension legislation and pension documents, trying to understand how
the financial capitalists have stolen trillions from common workers,
engineering the greatest transfer of wealth in the history of mankind,
and saddling them with massive debts in the form of pension IOUs.
»
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Hmm. Not sure why this didn't show in response to Ananonymous as it should have.
Arguments stray away from their point if terms don't mean anything. The "deal" in question was a pension.
If you want to talk about inheritance, that would be a different discussion. And you could find examples like Teddy Kennedy and Jay Rockefeller of people in gov't who could have retired the day they were born.
But their inheritances weren't pensions given as part of employment contracts, were they?
How can pointing out stuff happening in the private sector as straying away?
Your comment was about the private sector not offering this kind of deal.
Indeed, the private sector offers better deals.
Inheritance serves the same function as pensions.
Kennedy and the likes (they are not the only ones) got their deal from the private sector not from the public sector.
Bear with it, the private sector offers better deals. Contrary to your claims.
It seems from the some of the comments that people are making the mistake that the system is zero-sum. If the pensions are short, it's because the banksters too the money.
While the banksters have certainly taken money, the pension system here in the US (I don't know much about France) has long been a ponzi scheme. That means it promised payouts that it could not possibly pay. Default has long been inevitable.
Why?
Inflation. It used to be, when gold was officially money, that a pension could withhold a certain amount of gold from a worker's wage every year, invest this in productive activities, and pay it out over the worker's remaining expected life after retirement.
But inflation in our irredeemable paper regime would result in a pittance being paid instead! So pension systems introduced the idea of "indexing" the pension to inflation. Where is the extra money to come from to replace what is robbed by the central bank's inflation?
*blank out*
Blame the bankers' bonuses all you want, even if the banks weren't making money, the problem that inflation makes it impossible to save money over the long term would remain.
So Greenspan came up with a "solution". If asset prices rise to infinity, then everyone can have his cake and eat it too. We all know how that worked out.
A huge part of the problem is that pension promises were based on unrealistic expectations. But the other problem is that everyone wants a piece of the pension pot, including hedge funds, private equity funds, and mutual funds. Enormous fortunes have been made skimming pensions. It's not a lose-lose proposition, but it's fair to say that the financial masters have done well while most people got screwed.
Hi Leo,
Not everyone can be a Tocqueville when discussing the issues you are grasping in your post. You should focus on the strictly financial side of things. Like any decent financier. The way people solve their problem is a local issue. Everyone their way. No solution is applicable planetwise.
By the way should wish to understand the innings of the situation here France, this post is a much too schematic grasp anything.
Your view is the one of outsider. No problem per se. But beware not to confuse the normal course of "négociations paritaires" with anarchy. When groups of people disagree on issues such as pensions, it is a usual practice here to move into the kind of rough talks, strikes and a few other tough social rounds.
But as far as I can see, the negociation process is running decently. It is not supposed to be "un long fleuve tranquille".
US society, when working properly, has effective regulations via courts of justice and churches. We have street demonstrations and a few other tricks. Everybody their way. Let us just hope that the these social regulations (courts and churches in America and our local ways here) can bring the level of consensus that is required for our countries to operate.
Please - as an effective banker - focus on the money side.
"Who can blame them?" Workers "owed" pensions they never earned, but were awarded by politicians as a way of buying votes--you're joking, right?
The average public sector employee gets (as opposed to earns) about $60,000.- a year. Most retire between 55-58 at around 80% = $48,000.- they will on average live another 23-years so the retirement cost to the taxpayer is $1,104,000.- (wow).
Since they are retired about as long as they worked (both 20-25 years) their actual annual wage is 180% of $60,000.- or $108,000.- and that's what governments have to show on their books. About 20% of the workforce is in the public sector yet over the next 20-years they will collect over 50% of all pensions. Our demographic time-bomb now has a lit fuse as the public sector boomers roll into the very expensive for society years.
All you need to do is look at the pension issues that Leo puts on the table for us and you can see that just public sector pensions and health care will blow up the nations finances - we don't even have to take anything else into consideration. The only conclusion I can reach is that the issues are difficult so they'll keep printing and destroy the currency through a shot of hyperinflation - they cannot allow deflation to occur because actual dollar cost would increase as cash-flow was decreasing.
hit save twice
Everytime I read about the austerity measures proposed by various European governments I have to pinch myself...can this really be happening. I am amazed at the courage of the European governments proposing measures, such as raising retirement age by two years, that American government would not dare to propose. If the Europeans implement these austerity measures, and there is no catastrophic civil unrest, it will be amazing.
Proposing austerity is quite different from implementing the changes needed to make it real. Governments never shrink voluntarily, and unions aren't in the business of acting in the public interest.
This is because in the US, many public sector workers are ex-military.
The US is more heavily militarized. Any cuts in public sector pay can (and will) result in violent retaliation from the military and veteran's networks. It's happened in the past, and will happen again.
So the Euros can cut all they like and not have to fear assassination. In the US, the public sector is composed of many mad dog killers.
The public service is more heavily ex-military? Is that your point? I call bullshit on that. When in the past has there been violent retaliation from the military?
I think you have a theory. Relay some facts.
Dont know but the guy wrote about heavy retaliation . Not forcefully violent retaliation. Later, he wrote about military networks.
The US is a military empire. Crossing military (ex or current) staff is something the political staff has to think over twice as their power is derived from the military sector.
When reading, I thought more of pressure campaign, we got our men at key positions than violent retaliation.
My buddy in the coast guard will retire w/ 60k a year pension if he sticks with it til he's 41. My other buddy just got out of the marines and recieves $1,500 a month for "injuries" he sustained in iraq. (He's perfectly fucking fine.) It goes to show that we take too good care of our government workers and veterans. It is a nice gesture but it's unsustainable. Everybody associated with the government whether through employment or service feels more entitled to pension and easy living than anybody in the private sector.
US will not take austerity measures. We will stimulate the economy with $5T therefore guaranteeing eventual hyperinflation. Oh and banks will still pay out massive bonuses while offloading their shitty assets to fannie and freddie at completely unrealistic values.
Good post!
Nice post, Leo. The French situation captures the issue best for me because in France the whole concept of the ruling class-where they all attend the same ecole, graduate from the same university, etc. is more clearly seen than here in the etats-unis. But it basically comes down to the same thing: the ruling political and financial class promised the working class a nice, cushy and young retirement but was too busy stuffing their own pockets and lining their nests to make sure that the dough for the morts was there when they needed it. So now, the solution becomes to stiff the morts and the boys will have to, scare bleu!, buy their cigars out of their own pockets.
The situation is obviously much more complicated than that. The union leaders that the morts trusted were busy lining their own pockets and nests and also knew that the ruling class could not deliver. Let's also not forget the vigorish that the various mob affiliates took for their own account right off the top. Everyone was in on the scam to stiff the morts. That's the part that is always missing from your description of the pension wars.
Well, actually, both the ruling class and the working class stuffed their pockets from the same sources: the loot they operated over the people of the rest of the world.
Now, these sources no longer yield enough to allow the same scheme to come true.
Therefore, people who participated in the scheme because of convergence of interests found themselves tossed out of the bowl.
Same as gangs. Everything runs fine as long as the loot is enough to satisfy everyone. When the stream runs dry, well, start of troubles...
Unions are a much smaller portion of the populace here in the U.S. And even long time California democratic party hack Willie Brown recently admitted that gov't employee pay and pension have gotten way out of hand. As Brown admitted, the longstanding bargain was that if you were a gov't worker you'd be paid less but you'd have more job security and likely a better pension. Now they're paid *more* than private sector workers who have to actually show results or they can be fired and public sector pensions dwarf anything anyone gets in the private sector in the U.S.
As one example, from the Peoples' Republic of Massachusetts, employees of the commuter train system, can retire with pensions paying 80% of their highest paid years after just 22 years on the job. Imagine getting out of college and then retiring at 44 with an excellent pension.
Nobody in the private sector gets a ridiculous deal like that. Nobody. So, feelings of solidarity with gov't workers and their union are liable to be pretty faint among us private sector workers.
Nobody in the private sector gets a ridiculous deal like that?
Buddy, in the private sector, some can retire at birth.
Get your facts straight.
The public/private is to be discussed.
Funny how the banks never lose while grannies pension gets looted.
C'est La Vie.
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