Macron Faces Dreaded Test of French Leaders as Unions Strike

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Emmanuel Macron's push to transform France's sclerotic economy is facing the ultimate test of presidents past: “la greve.”

In what has been the undoing of previous French governments, unions representing everyone from transport workers to lawyers, doctors, teachers and students are going on an indefinite “greve,” or strike, starting Thursday to oppose Macron's plan to reform the country's pension system.

Thousands are marching in cities from Lyon to Nantes and Marseille as metros and trains services were largely halted, hospitals and schools struggled to remain open and air traffic was disrupted. Unions opposing Macron's plan for a top-to-bottom rebuilding of the pension system have threatened to bring France to a standstill until the government backs down.

While Macron has already barreled through reforms of tax and labor laws, history shows pensions won't be nearly as easy. In 1995, Prime Minister Alain Juppe abandoned his pension-reform plan after strikes paralyzed the country for about a month. Faced with the labor unrest, Macron is “calm and determined,” and will stick to his plan to “reform and modernize” France, his office said in an emailed statement. Unions are also digging in.

“We have one of the best pension systems in the world, if not the best,” the far-left CGT union said on its newsletter site. “Yet the president has decided, purely out of ideology, to wipe it out.”

Coming just a year after the start of the Yellow Vest movement that drew violent protests over several Saturdays in Paris and other major French cities, the strike risks turning into one of the biggest challenges of Macron's term. It's also become a catch-all for the country's discontent, with demands for everything from higher wages and lower gasoline prices to more environmentally friendly policies.

Macron, who announced 17 billion euros ($18.9 billion) of tax breaks to appease the Yellow Vest protesters, faces municipal elections in the spring -- crucial to cementing his fledgling political party before the legislative and presidential votes in 2022.

Universal System

Macron's plan is to abolish a pension system with 42 different benefit regimes for different classes of workers and replace it with a universal points-based system. In the 21st century, he argues, workers don't have linear careers, as was assumed in 1945 when France's pension system was conceived. The multitude of regimes has become “corporatist,” leading to injustice, complexity and failures, the government says.

“We will not stall” the implementation of the pension reform, Gilles Le Gendre, the parliamentary head of Macron's party, said today, noting that after two years of negotiations, “no union can seriously think” that the government “will give up.”

Unions say Macron's overhaul would shrink pensions, push back the retirement age and reduce solidarity between workers.

What Bloomberg's Economists Say...

“(Macron's) reforms aim to make the pension system financially sustainable. They would also mean gradually raising the retirement age, supporting GDP growth for decades to come. That's a help, but our long-term projections show economic success depends more on working smarter than longer.”

--Maeva Cousin. Read the full INSIGHT

The government says it will be necessary for French people to work longer to stop the system racking up more deficits. But it says it won't cut pensions or significantly increase contributions paid by workers.

Macron's government is still working on its final plan, and a bill may be presented to lawmakers as early as next week.

While the impact on the economy of a one-day strike would be marginal, if it lasts, consumer spending -- the main driver of growth -- could be dented, according to Ostrum AM's Chief Economist Philippe Waechter.

An Elabe poll published Wednesday showed that 58% of the French support the strikes over pension reform. Another survey by the same pollster on Sunday showed that a majority of the French consider the current pension system financially unsustainable. It also showed that 64% of them are in favor of a universal points-based pension system.

Strike a la Francaise

• On Thursday, 11 of Paris's 14 metro lines will be closed, according to its operator RATP. The suburban “RER” lines will be run on minimum service and only during rush hours, while tramway traffic will be patchy.
• Air France canceled 30% of its domestic flights and 15% of medium-haul flights, while EasyJet has canceled 233 flights, of which 70 are to and from the U.K. Air France has warned that traffic disruptions could last until Dec. 7.
• Only one out of 10 long-distance trains will run, state-owned railway company SNCF said. Rail and metro unions have called for the strike to continue until the government abandons its pension-reform plan.
• Hospitals, which have been demanding more funding since last spring, will be hit by the strikes, while 55% of school staff are expected to strike.
• The Eiffel Tower is closed.
• The protest in Paris will start at 2:00 p.m. from Gare du Nord station to Nation square, and is expected to draw a massive crowd.
• The far-right's Marine Le Pen has asked her supporters to join the protests. Socialists and far-left supporters are taking part.
• The Paris demonstration could also draw hard-core Yellow Vest protesters and anarchist activists known as “BlackBlocs,” who've destroyed property and burned cars in the past. The police have asked shops and buildings on the protest route to close.

--With assistance from Helene Fouquet.

To contact the reporter on this story: William Horobin in Paris at whorobin@bloomberg.net

To contact the editors responsible for this story: Geraldine Amiel at gamiel@bloomberg.net, Vidya Root

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