June 08, 2003|By KNIGHT RIDDER/TRIBUNE
PARIS - With a protest sign and a wide grin, Rachiol Boulaouane stepped out of the crowd of marching strikers last week and summed up the average French worker's view of the government's effort to solve a pension crisis that threatens to swallow the economy.
"Something has to be done, yeah," said Boulaouane, 30, who cleans housing projects for the city, "but I don't want to keep working until I have no teeth."
Like every French worker, public and private, Boulaouane labors 35 hours a week and gets at least five weeks of paid vacation a year. He also stands to earn a pension of 75 percent of his highest salary in a country where the average worker retires at 59.
Under the government's proposed changes, he and all other public workers would have to work for 40 years instead of 37 1/2 to retire with full pensions. Without that change, economists say, the pension system will soon be bankrupt.
Once public benefits are given, Western Europe is learning, they're hard to take away, even when they are no longer affordable.
In France, strikes by public sector unions and their sympathizers shut down the Paris airport and disrupted rail commuters Tuesday. Workers were on strike Tuesday in Austria, which is also trying to reform its pension system, and in Germany, where the government is trying to curb the continent's most generous welfare state.
"Things have to change, but people would love it if things would not change," Jean-Paul Betbeze, chief economist at French financial giant Credit Lyonnais, said in a telephone interview. "This is human after all, to want the benefit of something without the pain of it."
The underpinnings of the European welfare state are being eroded by global competition, in which workers and capital flow freely to wherever they can earn the best return; and by Europe's aging population.
Global competition means that European countries can no longer raise taxes to pay for expensive benefits. In France, the top marginal tax rate is 59 percent, the highest in the industrialized world, according to Forbes magazine's annual survey. Unemployment is twice as high as in the United States, and the economy is stagnant. Germany, Italy and many other European countries are in similar straits.
"If you ask the young people to make money, to invent, and I take half of it, people say, `Well, I read the news and there are places where they take a bit less, so I'll go there,'" Betbeze said.
But it wasn't inventors who were demonstrating Tuesday near Gare du Nord, Paris's main train depot. It was rank-and-file laborers, who see the situation in basic terms.
"People should be able to work as long as they like, and not have to work longer," said Patrick Labbe, a union representative who works for U.S.-based Clear Channel Communications.
Economists say it's not that simple.
Western Europe's aging population means that there are fewer workers than there once were to support each pensioner. In France, there are two workers for each retiree (compared with three in the United States), and by 2020, it is expected that there will be one for each. The country has a pay-as-you-go system, in which taxes from current workers support the pensions of retired workers.
European governments have been slow to act, but the impending retirement of the baby boomer generation and the recent economic slowdown have forced their hands.
In France, the center-right government of Prime Minister Jean-Pierre Raffarin, backed by President Jacques Chirac, wants to require public-sector employees (one-quarter of the work force) to work an extra 2 1/2 years to qualify for full pensions. That is already the rule for private-sector employees.
The change would push the minimum retirement age with full benefits to 60, compared with 65 1/2 in the U.S. Social Security system. The U.S. age will rise to 67 by 2027.
Not all unions oppose the plan, but opinion polls have found that a majority of the public has concerns about it, even though they understand that something must be done. Political observers say that is because people consider the changes symbols of an overall threat to the welfare state they cherish.
They may live in a global economy, with the proliferation of McDonald's restaurants and Gap clothing stores even in Paris, but many French, and many Europeans, don't accept what most Americans consider the basic rules of capitalism.
"How can a company that makes profits be allowed to lay people off?" said Sgloie Andre, a government kindergarten aide who was marching Tuesday.
"It's not that there isn't money in the economy. Companies are making bigger profits than ever," said her husband, Joel, a private-sector truck driver who attended to show his support.
If Tuesday's strikes were "the moment of truth," as the French newspaper Le Monde put it, it's not clear what truth they revealed. The last time the government attempted pension reform, in 1995, the strikes were so effective that they brought down the conservative government of Prime Minister Alain Juppe. Raffarin, however, has shown no signs of backing down.
"The street should express itself," he said recently, "but it's not the street that governs."