What Happened

The French government's plan to reform the country's pension system has precipitated the country's most sustained period of strikes in decades. Nevertheless, President Emmanuel Macron is determined to move ahead with the changes. On Jan. 24, the French Council of Ministers formally adopted the reform proposal, which will now move to the National Assembly for debate. Protests against the reform will continue, but Macron has invested a considerable amount of political capital in the project, making it unlikely that he'll abandon it. For Paris, the pension reform presents a key test for its credibility as it looks to push further reforms both in the French economy and in the wider European Union.

Why It Matters

Pension reform is Macron's flagship policy, and the fate of his presidency (and France's economic future) will be linked to it. Since he took power in mid-2017, Macron has pledged to reshape the French economy to improve its competitiveness. The pension push also has a European dimension, as he sees successfully implementing domestic reform as a way to legitimize his push for the European Union to make changes to deepen the bloc's political, economic and military integration. If the pension reform plan were abandoned, Macron would essentially become a lame duck (both at home and abroad) more than two years before the next presidential election.

Under the reform plan sent to lawmakers, France's 42 public pension mechanisms would be replaced with a single, unified system. The goal of the change is to make the retirement system more sustainable as the French population ages. France's spending on public pensions ranks among the highest in the world, and it's only set to increase as the country's demographics shift. The reform promises that public spending on pensions will drop from the current 13.8 percent of gross domestic product to 12.9 percent by 2050. But the changes to make that happen would include the elimination of retirement benefits for workers in certain sectors and, in some cases, force other workers to delay their retirement to receive a full pension. 

These changes have led to prolonged strikes and large demonstrations against the government. The strikes have hit the country's public transportation system especially hard with trains, subways, buses and other modes of transport disrupted over the past two months. At one point, protesters also blocked access to the country's oil refineries, leading to temporary supply shortages at hundreds of French gas stations. On Jan. 21, a strike action also led to temporary electricity outages in some areas of Paris. 

The Elysee's strategy to deal with these protests involves three main parts. First, Paris aimed to break unity among labor unions by offering concessions to the more moderate ones. That strategy is working: The French Democratic Confederation of Labour recently ended its strikes after the government agreed to hold additional discussions over ways to avoid extending the retirement age. This has left the more combative General Confederation of Workers as the main force opposing the reform. Second, Paris hopes that more radical protests will reduce popular support for them, a strategy that also seems to be bearing fruit: Participation in recent demonstrations has fallen compared to those held in December. And third, Paris has promised to extend ongoing negotiations with unions and business groups to make the reforms easier for both to digest. The Elysee has said it remains open to amendments to the pension reform bill. 

What's Next

Negotiations among the government, business groups and moderate unions will continue next week. The National Assembly will then debate on the reforms beginning in February. This process will take weeks, leaving open the possibility that Macron's reform could be amended to make it easier for workers to accept. Protests and strikes will also continue for several more weeks, along with related disruptions to public transportation. But given its importance to Macron's credibility and his party's majority control of the National Assembly, the reform will be eventually approved.