Cash-strapped France turns reform focus to pensions

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May 13, 2013 10:21 PM EST

President France Hollande's government launched consultations on Monday with trade union leaders and employers on an overhaul of France's pension system, a reform seen as vital to sorting out French public finances.

The European Commission has given Paris a further two years to reduce its public deficit to a targeted 3 percent of output but wants France to commit to structural reforms in return.

Hollande has made a pension revamp a top priority this year but, with his ratings already at record lows, is also eager to avoid a repeat of mass street protests in 2010 when predecessor Nicolas Sarkozy raised the retirement age to 62 from 60.

The government is due to consult employers and trade unions through to parliament's summer recess. However it will not give them a say in a draft law due in the second half of the year as it did with new labour market rules agreed in January.

France will see a 20 billion euros (16.9 billion pounds) annual shortfall in its pension system by 2020 if it does not act.

The government has ruled out raising the legal retirement age beyond 62, but Hollande has said that extending the pay-in period beyond the current 41.5 years is all but inevitable.

Two other options include raising the level of contributions to the retirement system and paring down pay-outs by limiting how much pensions are adjusted for inflation.

The head of the Medef employers lobby, Laurence Parisot, called for the pay-in period to be raised to 43 years by 2020 and for the retirement age to be lifted to 65 years from 2040.

The moderate CFDT union, which was a key backer of the labour reform, said on Monday it could back a deep overhaul as long as it considered fair. The hardline CGT and FO unions oppose raising either the retirement age or the pay-in period.

A recent poll showed, however, that nearly two thirds of French would support a reform raising the retirement age and 66 percent think the pay-in period should be raised.

(Reporting Jean-Baptiste Vey and Yann Le Guernigou; writing by Leigh Thomas and editing by Mark John)

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