Paris: France is bankrupt. In terms of the Maastricht criteria, French public debt is 97% of GDP, or roughly two trillion euros. But add to this, the off-balance-sheet debt (estimated at over three trillion euros) such as pensions (19 billion euros a year deficit), unemployment insurance (over five billion/year deficit), health care system (15 billion/year deficit) and other social guaranties supposed to finance themselves and the real debt of France is an astronomical 242% of GDP. Yet, labor in France refuses to hear of reform. Students, who have never worked a day in their lives, are marching with public service employees and fighting police in the streets.
Perhaps the nuttiest of all opposition to change comes from railroad employees. This week workers at the state owned train company, SNCF, went on strike for the third time in two months because they oppose raising the retirement age for train drivers from 50 to 52 (yes, you read right) and for the other staff from 55 to 57 while the rest of France has to wait until the age of 63 if they have contributed to enough quarters, (otherwise 65) which is still generous by European standards. In Germany it is 67.
The SNCF employs 150 thousand people but has 270 thousand pensioners on its books. It is running a 45 billion euro deficit or 150% of its turnover and it is growing at 15 billion a year. Just the retirement advantages cost 3.5 billion euros a year which means every French tax payer is contributing 1000 euros annually to subsidize the SNCF. And like all French civil servants, their pensions are based on the last six months of salary, rather than the best 25 years in the private sector.
European studies show SNCF workers are 30% les productive than their private counterparts. To increase productivity and reduce costs, the government wants to pay for their commute to work only if they live more than 50 kilometers away rather than three at present. Also, they would like to reduce from 14 to 13 hours the time allowed between two shifts so they can work more shifts.
Among the other SNCF advantages the government wants to cut back on, or reduce, are free tickets, which not only employees and their immediate families, including children to the age of 21, benefit from, but also the parents, parents-in-law and grandparents who are also eligible. In 2011, over 1.1 million people took advantage of the system but only 15% were actively employed by the SNCF. The state auditor, La Cours des Comptes, estimates this privilege costs the SNCF 100 million euros a year.
The state owned railroad employees also get 126 rest days a year on top of the minimum six weeks vacation.
SNCF “acquired rights,” as they call it, will cost 150 billion euros in government subsidies over the next ten years. But they aren’t the only ones. All civil servants have a special retirement deal with pensions based on the last six months of salary and it is notoriously known that they get substantial promotions and raises their last year of service. Customs agents, firemen and public hospital nurses can retire after 17 years of service. Police, Prison Guards and Air Traffic Controllers can also retire at the age of 52.
Then there are the cultural workers, les intermittents du spectacle, which compose not just actors and dancers but also technicians, carpenters and anybody else who works in cinema, theatre, radio, TV and so on. They now have to work 507 hours in a twelve month period (up from ten months) to benefit from a full eight months of unemployment. Everybody else has to work 610 hours over 28 months to get full unemployment benefits for a much shorter period of time (one day per days worked).
Other former state-owned or partially privatized firms also kept many privileges from their nationalized days such as Air France, or the Electric and Gas company and, they too, are striking, and marching and protesting to keep their “acquired rights,” the bill for which the tax payer is footing.
A simple calculation: There are 254,000 people declared cultural workers, les intermittents du spectacle, who pay into the unemployment fund some 232 million a year (yes, they pay less than others). In 2012, for example, 106,000 of them were on unemployment at a cost of 1.3 billion euros. Doing away with the special cultural worker regime would save the unemployment fund an estimated 400 million euros a year.
Among other measures French workers and students are protesting: make it easier for employers to hire on temporary contracts. French labor laws make it very hard and expensive to lay someone off when business slumps, and limits to two the number of times you can renews a temporary contract before it becomes permanent. As a result, firms are not hiring. The proposed bill will reduce the ceiling on severance packages and the number of quarters a company has to be in the red before they could lay off employees. The government would also like to reduce social charges on companies now as high as 44%.
Unemployment in France is around 12%. Youth unemployment is at 25%. But when you go into the projects inhabited by those of North African and African background, youth unemployment soars to 45%. The government wants to reduce unemployment benefits, force job seekers to do training in exchange for a monthly allowance and that others accept jobs offered even if it is not what they were looking for or corresponds to their previous salary.
But it seems every time people take to the streets in France, the government sacrifices parts of its new labor bill, gutting it of most of what the employers association had been asking for and the government hoping to enact. In the end nobody is satisfied and France goes deeper and deeper into debt.
France is far over the three percent yearly deficit and 60% debt to GDP ceilings imposed by Maastricht Euro Accords. Brussels has told Paris to trim 40 billion off of its spending but that is not happening.
At this rate, France will default and as it is ‘too big to fail’ there will be nobody able to bail them out. This is not “puny little Greece.” The Euro will shake at its foundations and France will either have to go back to the Franc or see the Euro crumble completely. Is that really so hard to explain to students who get a free education thanks to the working tax-payer, or train drivers who retire at 50 because some poor slob has to work until the age of 65 to pay his pension?