Friday, June 25, 2010

Close But No Cigar!

Angela Charlton of the Boston Globe reports, French prime minister urges big cost-cutting:
France's Prime Minister Francois Fillon on Friday rebuffed unions angry over plans to raise the retirement age by two years, urging the French to show "courage" and make an unprecedented effort to cut the enormous national debt.

The government said Friday it's considering freezing public sector salaries for the next three years -- a prospect that prompted unions to slam the door on salary talks with the labor minister in protest.

Unions are energized after nationwide strikes and protests Thursday that brought nearly a million people to the streets to protest President Nicolas Sarkozy's bid to reform a money-losing pension system. The reform includes raising the retirement age from 60 to 62 -- which would still be among the lowest in Europe.

Fillon defended the pension reform at a news conference hastily arranged after Thursday's protests.

Fillon said he "understands the worries" of workers, but added, "We must break the spiral of indebtedness. ... We need a bit of courage."

He carefully avoided using the word "austerity," saying it was too soon to impose cutbacks like the more sweeping ones introduced in Germany or some other European countries.

He spoke as Sarkozy and Finance Minister Christine Lagarde were heading to Canada for meetings of the G-8, or Group of Eight, and later the G-20, or Group of 20 leading world economies.

A key subject at the discussions will be how to revive the world economy after global financial meltdown, and how much and how fast to cut government spending.

Lagarde said on France-Inter radio Friday that France's pension reform is the government's way of "trying to send a message of security to the markets" about France's commitment to cutting its debt.

The French budget deficit was at 7.5 percent of gross domestic product last year. The conservative government has vowed to bring it under 3 percent -- the threshold set by the European Union -- by 2013. The Greek crisis has given added urgency to France's plans to cut back.

Fillon insisted that the pension reform and other cost-cutting would not threaten to slow the economic recovery, and reiterated forecasts that the French economy will grow 1.4 percent this year after contracting 2.5 percent last year.

Fillon said the retirement reform will save nearly euro19 billion ($29.3 billion) in 2018 and should bring the pension system back into the black that year.

Unions say money for the pension system should come from higher taxes or charges on those who are still working, and see cost-cutting in the pension system as an attack on a hard-fought way of life. The government says that given rising life expectancy, workers must retire later.

Unions have long feared that public sector salaries could be targeted in cost-cutting measures, and the government confirmed Friday that a 3-year salary freeze is on the table, according to Jean-Marc Canon, head of the CGT-Fonction Publique union.

He was part of salary talks with Labor Minister Eric Woerth on Friday that ended in a union walkout.

Feeling the heat, French president Nicolas Sarkozy said cigars are out and perks will be cut ahead of austerity measures:

Parliamentary pensions, a lavish Bastille Day garden party and ministers’ Cuban cigars are to be sacrificed in the name of economic recovery as the French government seeks to show that ministers are sharing the pain of their austerity drive.

With his government attempting to raise the retirement age and bracing people for cuts of €45 billion in public spending, president Nicolas Sarkozy has said ministers must lead by example and reduce their own budgets. France has not yet set out a detailed austerity package, but the national auditing office recently called for urgent moves to trim the deficit.

It is widely believed that Mr Sarkozy will cancel the traditional July 14th garden party at the Elysée Palace, an annual event that was attended by 7,000 people last year and cost more than €700,000.

Ministers are also to be ordered to cut the number of people employed in their cabinets (private offices), while a reduction in the number of ministers is expected in the next reshuffle.

The government’s belt-tightening follows a series of damaging revelations about ministers’ extravagant lifestyles and waste of public money.

It was reported this week that prime minister François Fillon had asked junior minister Christian Blanc to reimburse the state €12,000 of taxpayers’ money which was used to buy expensive cigars.

Le Canard Enchaîné, which has specialised in publishing details of ministers’ expenses, had published receipts from a Paris cigar shop for high-end Cuban brands that were billed to the government.

Mr Blanc, a former head of Air France who is now junior minister for the greater Paris area, blamed a staff member for the purchases and has already reimbursed €3,500 for those he had smoked.

Further embarrassment followed when it was revealed that Christine Boutin, a minister sacked last year by Mr Sarkozy, was still earning €18,000 a month from the state thanks to a parliamentary pension and a special “mission” from the president to write a report on globalisation.

Ms Boutin said she would keep the pension and give up the € 9,000 a month for the report.

The Boutin controversy then led to five ministers who were drawing a parliamentary pension being ordered to forego them as long as they served in the cabinet.

Until recently, the generous perks and privileges given to France’s ruling class had attracted relatively little scrutiny, but the economic crisis, public disquiet and regular leaks have shone a harsh light on the system.

Two months ago, Mr Fillon ordered ministers to take only commercial flights after his state secretary for overseas development, Alain Joyandet, spent €116,500 chartering a private jet to attend a conference in Martinique.

Another perk in peril is the free Paris flat that goes automatically with cabinet rank, whether needed or not.

That one hit the headlines when industry minister Christian Estrosi was revealed to be occupying rooms at the Economics Ministry in eastern Paris while lending a relative his official apartment overlooking the Eiffel Tower on the other side of the city.

Fadela Amara, state secretary for urban affairs, admitted this month that family members sometimes used her official apartment in the same upmarket district while she stayed in her own more humble flat in a working-class part of the city.

The revelations about ministers’ royal-style perks have been especially damaging because they coincide with the government’s attempts to prepare the public for severe spending cuts.

Didier Migaud, the head of the national auditing office, said savings of €45 billion would be needed and that the government would be required to take a “very sharp turn” on public finances.

France, alone among the biggest European economies, has yet to set out details of a savings plan, but a spokesman for Mr Sarkozy said measures would be outlined in the coming weeks.

What are those French ministers smoking? Meanwhile, Reuters reports that the Greek government agreed on Friday the most radical shake-up of its pension system in decades to avert bankruptcy and satisfy foreign lenders despite fierce opposition at home:

The reform cuts benefits, curbs widespread early retirement, increases the number of contribution years from 35-37 to 40 and raises women's retirement age from 60 to match men on 65.

"We inherited a pension system which had collapsed and we are fixing it," Labour Minister Andreas Loverdos told a news conference after the cabinet approved the cuts. "It is our responsibility to save the country from bankruptcy."

The ruling socialists face a battle over the reforms, agreed as part of a 110 billion euro ($147.6 billion) emergency loan package from the EU and IMF. Most voters oppose the reforms and a strike on June 29 will gauge the strength of public discontent as lawmakers start debating the bill.

"The draft pension bill ... is slaughtering fundamental pension rights," public sector union ADEDY said in a statement.

By contrast, the EU Commision in Brussels praised the overhaul as respecting the loan deal.

"We welcome it as a major step towards improving the sustainability of public finances," spokesman Amadeu Altafaj Tardio said.

The socialist party has 157 of 300 seats in parliament and the reform is likely to pass despite some criticism from its ranks.

Analysts see the Greek pension reform as a test case. It goes beyond tax increases and public wage cuts to tackle a sector which epitomises many of the woes that have caused the country's downfall, including tax evasion, red tape, selective privileges and delayed reforms.

And if you think things are bad in Greece and France, here comes Romania where protests are taking place over pension, wage cuts:

Hundreds of people were protesting Friday in the Romanian capital over cuts to public wages and pensions, the spokesman for the country's president said.

Unions said there were 600 people outside the presidential palace, but the spokesman said there were about 400.

Anti-riot police had to stop about 25 or 30 people who went past the barricades, spokesman Valaureu Turan told CNN.

Prime Minister Emil Boc recently announced a 25 percent cut in public sector wages and a 15 percent cut in pensions. The Constitutional Court of Romania ruled Friday that part of the laws are not constitutional, so the government will have to decide on the next step, Turan said.

As you can see, the global pension war is spreading fast. Change is brutal and workers are angry. Who can blame them? They're seeing banksters get away with billions in bonuses and bailouts, and now that the pension Ponzi is running out of money, they're stuck having to work longer to make up for the shortfall.

As for the capitalist ruling class pushing these reforms, they're all saying 'close but no cigar'. If Marx were alive today, he'd be pouring over pension legislation and pension documents, trying to understand how the financial capitalists have stolen trillions from common workers, engineering the greatest transfer of wealth in the history of mankind, and saddling them with massive debts in the form of pension IOUs.

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