Macron Should Go Ahead with Pension Reforms

Emmanuel Macron
French president Emmanuel Macron chats with a guard at the Elysée Palace in Paris, December 19, 2017 (Elysée/Ghislain Mariette)

Emmanuel Macron is reportedly mulling pension reforms that were put on hold during the COVID-19 pandemic.

There are risks: reforms will almost certainly spark protests, including from trade unions, which oppose raising the retirement age. Macron can ill afford social unrest a year away from the election.

But it could also burnish the French president’s reformist credentials after the COVID-19 crisis forced him into a more managerial role.

Macron is expected to unveil his plans when he addresses the nation ahead of Bastille Day on July 14. The fact that it has leaked he may bring back reforms suggests he is testing the waters. So let me add my arguments to the discussion.

I’ll take the political first before covering the — more important — substantive arguments. Read more “Macron Should Go Ahead with Pension Reforms”

The Silent Reform of Spanish Pensions

Pablo Iglesias María Jesús Montero José Luis Escrivá
Pablo Iglesias, María Jesús Montero and José Luis Escrivá, the Spanish ministers of social rights, finance and pensions, deliver a news conference in Madrid, May 29, 2020 (La Moncloa)

Spain has a critical and essential employment problem: high chronic unemployment and job insecurity. Both of these are among the key causes of an embarrassing inequality, one of the worst in Europe.

Then, to complicate the solutions, comes the problem of the high public deficit, which has increased over the last decade as an inevitability. A debt aggravated by its dependence on external financing with a bias toward instability. And at the heart of this debt is the chronic deficit accumulated over the last decade in the pension system, which widens its deficit every year. Read more “The Silent Reform of Spanish Pensions”

Macron’s Pension Reforms Are Eminently Reasonable

Then-Prime Minister Paolo Gentiloni of Italy is received by President Emmanuel Macron of France at the Elysée Palace in Paris, September 27, 2017
Then-Prime Minister Paolo Gentiloni of Italy is received by President Emmanuel Macron of France at the Elysée Palace in Paris, September 27, 2017 (Elysée)

Having liberalized labor law to make it easier for companies to hire, reined in labor migration from Eastern Europe to protect low-skilled workers in France and shaken up intercity bus service and the state-owned railway company, President Emmanuel Macron — just fighting his way back from the reactionary Yellow Vests protests — is taking on a reform of France’s sprawling pension system.

You can’t accuse the man of not trying. Read more “Macron’s Pension Reforms Are Eminently Reasonable”

Greeks Push Through Pension Cuts, Eye Debt Relief

Greek lawmakers pushed through €5.4 billion in savings early on Monday despite violent protests outside parliament and a three-day strike that has brought the Balkan economy to a standstill.

The cuts were required under Greece’s third and latest bailout from the rest of the European Union and the International Monetary Fund.

The country’s far-left leaders, having failed to find a way to honor their election pledge to cancel austerity, hope the latest cutbacks will at least unlock talks about debt relief.

Euclid Tsakalotos, the finance minister, warned that the alternative was “another Greek crisis” that could perhaps lead to “another failed state in the region.” Read more “Greeks Push Through Pension Cuts, Eye Debt Relief”

Greece Rejects Creditors’ Call for Pension Cuts

Mark Rutte Manuel Valls Alexis Tsipras
Mark Rutte, Manuel Valls and Alexis Tsipras, the prime ministers of the Netherlands, France and Greece, meet at the World Economic Forum in Davos, Switzerland, January 21 (WEF/Valeriano Di Domenico)

Pensions are at the center of Greece’s latest dispute with its creditors.

The Greek Kathimerini newspaper reports that the International Monetary Fund’s managing director, Christine Lagarde, stressed to Prime Minister Alexis Tsipras during a recent meeting at the World Economic Forum in Davos, Switzerland that his government’s proposal for pension reform was inadequate.

The IMF jointly administers Greece’s €86 billion bailout with the European Union.

But Tsipras has said Greece won’t succumb to “unreasonable and unfair demands” and reportedly told Lagarde “there is no way” he can cut pensions for current retirees.

“One pension is a whole household’s income in the present circumstances,” the far-left leader told parliament last month. Read more “Greece Rejects Creditors’ Call for Pension Cuts”

Unfunded State Benefits: America’s Next Fiscal Crisis

The sun sets on the Texas State Capitol in Austin
The sun sets on the Texas State Capitol in Austin (Shutterstock/Ryan Conine)

America’s fiscal crisis looks less pressing than only a few years ago. A combination of spending restraint and tax increases that has resulted from messy compromises between President Barack Obama, a Democrat, and the Republican Congress should help push the deficit down to a manageable 2.5 percent of economic output this year.

Longer term, the rising costs of health and pension programs still look worrisome. But before the problem reaches Washington DC, it could wreak havoc at the state and local-government level. Read more “Unfunded State Benefits: America’s Next Fiscal Crisis”

Lack of Greek Pension, Tax Reform Seen Blocking Deal

Christine Lagarde, managing director of the International Monetary Fund, speaks with Wolfgang Schäuble and George Osborne, the finance ministers of Germany and the United Kingdom, in Washington DC, April 16
Christine Lagarde, managing director of the International Monetary Fund, speaks with Wolfgang Schäuble and George Osborne, the finance ministers of Germany and the United Kingdom, in Washington DC, April 16 (IMF/Stephen Jaffe)

Hopes of a last-minute deal to save Greece from bankruptcy started to evaporate again on Wednesday when it emerged that the Balkan nation’s creditors had rejected its latest proposals for pension and tax reform.

Another meeting of European finance ministers broke up without an agreement, deferring the matter — once again — to a European Council of government leaders that was due to reconvene on Thursday.

According to documents obtained by the Financial Times, the International Monetary Fund — which jointly administers Greece’s €240 billion bailout with the European Union — wanted Greece to raise the retirement age faster and phase out a “solidarity grant” for the poorest pensioners.

Originally, the far-left government that came to power in Athens earlier this year ruled out any pension cutbacks. Instead, it proposed to reinstall a thirteen month of pension payments, something it could not possibly afford.

When it became clear the creditors would not pay out the final €7.2 billion tranche of Greece’s bailout if it walked back on previous commitments to make the pension system more affordable, the country suggested raising the retirement age to 67 by 2036. It later proposed 2025. The IMF insists on 2022 as a deadline.

The fund also called for a quicker phasing out of the “solidarity grant” and rejected a Greek proposal to raise employer contributions to the main pension plan almost 4 percent, likely fearing that the added tax burden on companies would do little to lift Greece out of recession.

Greece returned to negative growth after it voted Syriza into office in January, a far-left party that campaigned on tearing up the bailout that has kept Greece from going bankrupt for the last five years.

The IMF previously raised doubts about Syriza’s commitment to economic reforms in February. But rather than submit more credible proposals, the party wasted the next four months haggling with its creditors over the terms of another loan and debt relief — both of which eurozone governments and the IMF consistently ruled out if Greece would not comply with the conditions of its original support program.

Pension reform is long overdue. In the years leading up to Greece’s near-default in 2010, government spending on pensions rose from 12 to 17 percent of annual economic output, reaching the highest rate in the eurozone.

Last year, the Greek Finance Ministry revealed that three out of four workers benefit from early retirement rules that allow them to stop working before they even reach the age of 61.

Greek prime minister Alexis Tsipras, who was elected on promises to end austerity, unexpectedly flew to Brussels for crisis talk on Wednesday after suggesting the creditors were negotiating in bad faith. “This curious stance may conceal one of two possibilities: either they don’t want an agreement or they are serving specific interest groups in Greece,” he told reporters.

The IMF also rejected Tsipras’ proposal for a one-off 12 percent tax on all corporate profits over €500 million that was supposed to raise €1.3 billion this year.

But the creditors backed down on their demand to include electricity in the highest, 23 percent sales tax rate and said they would allow Greece to create a new 6 percent discount sales tax for books and medicine.

Time is running out for Greece. Without the last bailout tranche, it could probably not pay off a €1.5 billion loan from the IMF by the end of the month. It may also have to default on €3.5 billion in bond redemptions that are due in the middle of July.

Tsipras’ insistence on relief from the austerity measures to which Greece’s financial support is tied has so far stopped the eurozone from finding a way to prevent one of its members from defaulting on its debt obligations for the first time.

The Greek leader is stuck between creditors who insist on liberal economic reforms and spending cuts and an inexperienced, radical party that is resistant to any compromise with institutions it blames for impoverishing the country.

Belgian Premier Unveils Labor, Pension Reforms

Belgium’s incoming prime minister Charles Michel emphasized labor and pension reforms in his first speech to parliament on Tuesday as head of a coalition of right-wing parties.

Alternating between Dutch and French, Michel, whose liberal Mouvement Réformateur is the only Walloon party in the new government, called for structural reforms in order to modernize Belgium. “To do nothing is to regress,” he said. “We reject fatalism and paralysis.”

For a country that hasn’t seen unemployment below 8 percent in two years, Michel can ill afford not to liberalize a jobs market that is far more rigid than those of its neighbors. Read more “Belgian Premier Unveils Labor, Pension Reforms”

Britain’s Osborne to Freeze Benefits, Cut Pension Tax

British chancellor of the exchequer George Osborne attends a meeting in London, England, September 15, 2014
British chancellor of the exchequer George Osborne attends a meeting in London, England, September 15 (Cabinet Office)

Britain’s chancellor George Osborne on Monday promised a next Conservative Party government would freeze welfare benefits for people of working age and abolish taxes on pensions. In a conference speech, he positioned his as the “party of progress” and dismissed the opposition Labour Party as living in the past.

Speaking in Birmingham, Osborne said the freeze would not include disability benefits, maternity pay and pensions but save £3 billion — money he would put toward financing three million apprenticeships for young Britons, “three million more chances for a better life so we help our citizens get jobs instead of more immigration from abroad.”

The freeze would nevertheless be “a serious contribution to reduce the deficit,” said Osborne, who argued it was also fair. “Families out of work should not get more than the average family in work.”

According to the Treasury, some ten million households would be affected by the freeze, roughly half of which are working. Read more “Britain’s Osborne to Freeze Benefits, Cut Pension Tax”