French budget talks: pension reform must remain, says business boss

The plan to reform pensions in France mustn’t be altered to appease political opponents, said the head of the country’s largest employer federation on Thursday.

“The effectiveness of the reform must not be compromised”, said Patrick Martin, chief of Medef, speaking to linked media groups RMC and BFMTV.

“We are not in normal circumstances … this is not the time to pick up this reform again”, he added.

The warning arrives at a tumultuous period for France, which finds itself in political deadlock over its budget commitments. 

This week, government ministers are meeting leaders from a range of political parties, hoping to drum up support to pass a fiscal plan for 2025.

France is currently overspending, with its 2024 deficit estimated at around 6.1% of economic output.

A widening deficit means that it is more expensive for France to repay its creditors, while economic uncertainty is also hampering new investments.

A political bargaining chip?

France’s pension reform law, which involves raising the retirement age to 64, was passed in 2023.

Due to its unpopularity, it could potentially be used as a bargaining chip by the new government.

Prime Minister François Bayrou will be seeking to avoid the fate of his predecessor, who was ousted at the end of last year.

Michel Barnier failed to secure the necessary parliamentary support for his 2025 budget bill, leading to the collapse of the government.

When asked if the pension reform could be modified, finance minister Éric Lombard told France Inter radio on Monday that nothing was off the table.

The details of the new budget plan are set to be outlined by Prime Minister François Bayrou on 14 January in a policy speech.

Finance minister Lombard has suggested aiming for a deficit target of between 5% and 5.5% in 2025, a slightly softer aim than the 5% for which Barnier was pushing.

Speaking in a new year address on Wednesday, meanwhile, Bank of France Governor François Villeroy de Galhau claimed that France’s debt levels had surpassed “critical thresholds.”

He added: “This year we must return to a deficit as close as possible to 5% of GDP, and clearly lower than 5.5%.”

Villeroy said France did not have to choose between recovery and growth but, rather, that lowering the deficit would boost investor confidence and therefore feed economic expansion.