Gloom in France

From the Economist:

Thus the 2003 pension reform lengthened the number of years that public-sector employees must work before qualifying for full pensions. But it left unchanged the absurdly generous regimes for the most sensitive (and strike-prone) employees, such as train drivers and electricity workers. A recent study by the government's pensions advisory council concluded that, despite the reform and with no improvement in unemployment, spending on pensions will swell from 12.8% of GDP in 2003 to 14.4% by 2020.

Similarly, the 2004 health reform laid down new rules in an effort to control costs, including an obligation to consult a family doctor before seeing a specialist so as to qualify for full reimbursement, and the introduction of a non-refundable €1 ($1.20) payment per consultation. The aim was to curb a soaring health deficit, which hit €11.6 billion in 2004. Yet a recent government-commissioned report by Michel Pébereau, a banker, said that there would still be at least a €22 billion shortfall in the health-insurance fund by 2015.

All the while, despite frequent promises to reduce the size of the public sector, its ranks have swollen. Since Jacques Chirac became president in 1995, the civil-service payroll has grown by 13%, to 5m. The upshot is unsustainable pressure on the public finances. This year, for the first time, almost the entire proceeds of French income tax will go to pay interest on public debt. In his report, Mr Pébereau said that, on present trends, France's public debt will jump from 66% of GDP to 100% by 2014.

On the labour market, Mr de Villepin has at least grasped the need both to bring down joblessness and to loosen rules that deter job creation. He has made jobs his central preoccupation, conducting weekly pit-stop trips to job centres or training schemes. He has introduced a more flexible two-year contract for firms employing fewer than 20 workers. Now he is trying to rush through parliament a similar contract for those aged under 26, which would make it far easier to shed workers during their first two years. This has prompted an outcry from the unions and the opposition, which accuse him of institutionalising insecurity for the young.