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M. Continuo

France cuts pension age for some, EU uneasy


    PARIS (Reuters) - France's government agreed to cut the pension age to 60 for some long-time workers, making good in the face of a dire economic backdrop on an election pledge the EU had warned would overburden an already creaking social welfare system.

    President Francois Hollande, who took power in mid-May on a pro-growth ticket for the economy, made a partial rollback of his predecessor Nicolas Sarkozy's pension reform a part of his manifesto.

    Wednesday's decision, announced by decree, was anticipated but still drew stinging criticism from the country's conservative opposition.

    The change, which comes into effect in November and reverses Sarkozy's 2010 reform that raised the pension age to 62 from 60, affects workers who have spent at least 41 years in labour-intensive jobs.

    Social Affairs Minister Marisol Touraine told reporters after a cabinet meeting that the measure would cost 1.1 billion euros per year up to 2017 and 3 billion euros (2.42 billion pounds) thereafter, lower than the 5 billion euros previously estimated.

    The tweaks would be financed by increased pension contributions, she said, adding: "We committed to put this measure in place quickly for social justice for those who started working early."

    The reform will also reduce the French workforce at a time when unemployment rates are at their highest level this century.

    The number of French jobseekers rose in April for the twelfth month running to 2.89 million, the highest since September 1999, data showed last week. The labour ministry said it was braced for more layoffs in the months ahead.

    CREDIT RATING THREAT?

    The European Commission warned last week that France would struggle to meet its fiscal targets without spending cuts, and that financing of the pension system had to be closely monitored despite savings from Sarkozy's reforms.

    Earlier this month, Prime Minister Jean-Marc Ayrault said the government was fully committed to meeting a target to cut the public deficit to within 3 percent of gross domestic product next year.

    But domestic criticism of Wednesday's rollback came swiftly, with the head of the conservative UMP party, Jean-Francois Cope, calling it "madness."

    "It risks the downgrade of France's credit rating and at this rate tempts fate," Cope said at a weekly party news conference. "It is not possible for Francois Hollande to continue to bury his head in the sand."

    Sarkozy's hard-fought pension reform had been welcomed by financial markets and credit ratings agencies concerned about France's ability to cut its debt and deficit levels in the face of stagnant economic growth.

    (Reporting By John Irish and Alexandria Sage; Editing by John Stonestreet)