France cuts pension age for some despite EU unease

PARIS (Reuters) - France's new left-wing government announced on Wednesday a cut in the pension age to 60 for some long-time workers, carrying out an election pledge in the face of economic troubles and an EU warning that it would overburden an already creaking social welfare system.

Socialist President Francois Hollande, who took power in mid-May on a pro-growth ticket for the economy, had promised a partial rollback of his predecessor Nicolas Sarkozy's pension reform if he won.

"Promise made, promise met," said Prime Minister Jean-Marc Ayrault.

He said in an interview on TV channel TF1 that the move was fully funded by a small rise in contributions and France would still meet European commitments gradually to reduce its public deficit to zero in 2017.

The cut, announced by decree, was anticipated but still drew stinging criticism from the conservative opposition.

The change, taking effect in November, partly reverses Sarkozy's 2010 reform that raised the pension age to 62 from 60 and 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 thereafter, less than the 5 billion euros previously estimated.

This 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 create vacancies at a time when unemployment is at its 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.

A BVA opinion poll suggested that economic morale had risen significantly since Hollande's election victory on May 3.

The poll showed that the percentage of people who said they were "relatively confident" about the economic situation in France had risen to 53 at the end of May from 33 percent at the start of the month.

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.

While Ayrault said the government was committed to meeting its target of cutting the public deficit to within 3 percent of gross domestic product next year and balancing the books in 2017, the rollback on pensions drew fire from the conservatives who put the initial reform in place.

The head of Sarkozy's conservative UMP party, Jean-Francois Cope, called the change "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 pension reform, adopted despite street protests by millions in 2010, was 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 Tim Pearce)