France faces pandemic-level spending to support ageing population, audit office says

PARIS – France’s ageing population will drive public spending to pandemic-era highs in the coming decades while eroding tax income, the public audit office warned on Dec 2.

Presenting a report on demographics and public finances, head of the Cour des Comptes Pierre Moscovici said nearly one in three French citizens will be over 65 by 2070.

Meanwhile, the working-age population will shrink by more than three million.

The shift will strain the foundations of France’s welfare state where healthcare, pensions and old-age dependency costs already account for over 40 per cent of public spending.

France’s public spending is among the world’s highest at 57.3 per cent of gross domestic product, but if pension and welfare benefits per person remain unchanged, it could soar past 60 per cent by mid-century.

This threshold was briefly breached before only during the Covid-19 pandemic.

France once stood out in Europe for its higher birth rate, but that advantage has eroded since the pandemic as the number of children per woman has fallen and retiree numbers climb.

Parking the problem

Ageing is all the more complicated in France because the pay-as-you-go retirement system does not require people to save for their pensions, which are funded by payroll contributions from active workers and their employers.

Fewer workers means less tax revenues, while longer lives demands more financial resources.

“This dynamic creates a particularly worrying scissor effect for the sustainability of public finances,” Mr Moscovici told journalists.

Immigration offers only partial relief, while boosting employment among youth seniors and women will require deep structural reforms, the audit office said.

Lawmakers in the Lower House of Parliament voted in November to suspend a 2023 pension reform that gradually raises the retirement age from 62 to 64, leaving the issue for the winner of a presidential election in 2026.

Waiting will only make the reckoning harsher, Mr Moscovici said, urging politicians to confront the demographic challenge head-on. REUTERS