PARIS – French President Emmanuel Macron’s government will present his plan to overhaul the pension system on Tuesday, likely triggering mass strikes and protests that may further undermine an economy already at risk of falling into recession.

Even moderate labour unions have vowed to down tools and take to the streets if the French President goes ahead with his election pledge of raising the minimum retirement age from 62. 

Yet the government insists such change is essential to boost relatively low employment rates among seniors and avoid persistent deficits in a system funded by worker contributions. 

Prime Minister Elisabeth Borne will give an overview of the plan late afternoon on Tuesday, including how much the government will raise the retirement age and possible changes to the minimum period of contributions to qualify for a full pension. Unions plan to meet later in the evening to decide how to respond. 

The showdown is set to be a defining moment in Mr Macron’s second term as French leader. If the 45-year-old forges ahead, he’ll likely face the kind of paralysing upheaval that accompanied – and sometimes defeated – his predecessors’ attempts to alter laws affecting labour and retirement. If he backs down, it would undermine his decade-long drive to drag France through a pro-business transformation.

The gamble comes at a difficult juncture for the French economy, which may have already contracted at the end of last year as soaring power prices and record inflation weighed on households and businesses.

Public finances are also strained after massive spending during the Covid-19 pandemic and the energy crisis.

Without changes to the retirement system, it alone is set to record an annual deficit of as much as 0.8 per cent of annual economic output during the next 10 years, according to France’s Pensions Advisory Council.

That will come at a time when the government is also seeking to devote more funds to investment in industry and the green transition. 

Mr Macron already postponed the presentation of the reform from December to avoid unions calling strikes during the holiday season and to give his ministers more time to try to win over worker representatives.

One option since floated by Labour Minister Olivier Dussopt would be to raise the minimum age by two years instead of the three Macron proposed during last year’s election campaign.

That could be combined with an acceleration of the implementation of a past reform that gradually increases the minimum period of contributions. 

Labour unions have reiterated opposition to even a smaller increase in the minimum age, however, as they say it would hurt the least skilled and lowest earners who began work earlier in life and at 62 have already paid into the system for longer than their wealthier peers.

They say there are other options to re-balance the system, including encouraging or obliging French companies to keep on older workers. 

“If Elisabeth Borne continues to think that the right reform is to increase the legal age, we will do everything to make the government back down,” Mr Laurent Berger, who leads the moderate CFDT union, said in an interview published in Le Parisien newspaper’s Saturday edition. “We will use all the levers at our disposal.”

A large majority of the French agree with the unions. According to a Jan 4 survey of 1,005 people by pollster Elabe for BFM TV, 47 per cent want the minimum age to remain at 62 and another 25 per cent say it should even be lowered.

Macron’s government also faces opposition in a divided Parliament after he lost an absolute majority in legislative elections in June.

The conservative Republicains party has said it could support the reform if the changes to age cut-offs are smaller and less sudden, and if Mr Macron sets a minimum pension level of 1,200 euros (S$1,715) a month.

“We want a reform that isn’t too brutal, a reform that is fair,” r Eric Ciotti, leader of the Republicains, said in an interview published on Sunday in French newspaper Le Journal du Dimanche.

If he fails to win support from opposition parties, Mr Macron could still use an article in the constitution, called 49.3, that allows bills to pass without votes.

But resorting to the special provision, which his government already did for the budget, may further anger protesters. BLOOMBERG