Government proposals to reform Luxembourg’s state pension system prompted six trade unions to stage demonstrations on 16 October 2012 over changes they describe as unfair and unnecessary. More than 2,000 people marched on the town centre of Luxembourg, while 800 members of the Confederation of Christian Trade Unions held their own protest. The Inspectorate of Social Security has calculated that, without the necessary reforms, the pension system will be in deficit by 2020 and the reserve exhausted by 2035.
On 2 February 2012, Luxembourg’s Minister of Social Security, Mars Di Bartolomeo, presented the government’s draft reform (in French, 905Kb PDF) of the state pension system. According to the proposals, the burden of financing the pension system would be shared between the workers, employers and the state.
The legal age of retirement would remain unchanged at 65, and the right of workers to take early retirement was also left unchanged. However, the proposals strengthened the link between living and longevity, proposing a reduction of benefits in the event of a shortened career. On the other hand, the reform introduced a gradual increase of contributions from 24% to 30% of wages.
According to Tom Dominique, an official from the Inspectorate of Social Security, if the system of social security was not reformed, they would be in deficit by 2020 and the current accumulated reserve would be exhausted by 2035. In addition, the rate of contributions would exceed 40% by 2045.
The implementation of the reforms would, according to the government, produce an annual growth of 3% in GDP and employment growth of 1.5%.
According to Minister Di Bartolomeo, the current outlook for GDP growth is the lowest it has been for 40 years.
Representing the employers, the Union of Luxembourg Enterprises (UEL) argued that the government’s figures were optimistic, given the fact that growth has been zero over the past five years (LU1209021I).
Unions held their first demonstration against the government’s reforms in March 2012, which brought together 600 people. Six unions held a demonstration on 16 October 2012, with more than 2,000 people turning out in the centre of Luxembourg. The union contingent comprised two confederations – the main confederation for the private sector, the Independent Trade Union Confederation of Luxembourg (OGB-L), with the General Public Sector Confederation (CGFP), and four other unions, the Luxembourg Association of Bank and Insurance Employees (ALEBA), the Local Governement Civil Service Union (FGFC), and two unions from the transport sector, FNCTTFEL-Landesverband and Syprolux. Forming a cross-union grouping, these six organisations have met regularly with the government since March 2012, but feel their voice has not been heard.
Unions say the proposal that has been presented to members of Parliament ignores their concerns.
‘Nothing has changed,’ said Jean-Claude Reding, President of OGBL, in the newspaper L’essentiel. He said the proposals would cause a deterioration of social issues, and criticised the reform for being ‘unfair on the young who will have to contribute for 43 years, given that they will enter [working] life later following their longer period of education’.
He added: ‘This reform does not acknowledge the hard work of those who are over 40 and worn out.’
According to OGBL, in a communication on its website: ‘In both the public and private sector, all workers, including those retired, are concerned by this reform’, which includes ‘the termination of the inflation-related adjustment mechanism to pensions (1.5%)’ due to come into operation on 1 January 2013.
Marc Glesener, President of ALEBA, claimed that the pension scheme ‘has a large surplus, equivalent to almost four years of pension payments’ and that there was no urgent need for the reform of the system.
The government was quick to try to calm the situation. Minister Di Bartolomeo told the Wort newspaper, that he ‘always made a point of working with the social partners, prior to, and throughout, the drafting of the law on pension reform’, and that his Ministry remained open to dialogue.
The unions, meanwhile, did not present an altogether united front. The Luxembourg Confederation of Christian Trade Unions (LCGB) held its own protest, bringing together 800 people in Niederanven. The union’s President, Patrick Dury, said in an article on the organisation’s website that the government needed to amend the Bill ‘to ensure greater social equality and solidarity’.
LCGB criticised, in particular, the abandonment of the pension adjustment mechanism. Indeed, according to the union, by eliminating this mechanism the government would also remove the adjustment of the pensions of civil servants who would have:
...cost the state around €16 million – and this money is precisely the area in which the government wants to save money!
Union problems were also highlighted when OGBL and CGFP criticised the LCGB, after comments made at its conference on 17 September 2012. At the conference the LCGB said a review was needed – given the current state of the government finances – on the wage agreement in the public sector between the CGFP and the government.
These comments angered the CGFP, and General Secretary Romain Wolff wrote to the leadership of the LCGB stating that this was an attack ‘not befitting of a trade union’ and was ‘below the belt’. The OGBL expressed its solidarity with the CGFP, accusing the LCGB of playing the government’s game and splitting the trade unions.
LCGB reacted by saying on 20 September 2012 that these statements were defamatory. Then on 10 October 2012 it said it was boycotting the demonstration planned for four days later, accusing OGBL being unwilling to cooperate with its leadership.
The crisis continues to undermine consensus over the Luxembourg social model. There are several sources of conflict over pension reform and also over the Government’s budget, its reform of the civil service and the representation of state workers.
Unions have criticised a hardening attitude by the state as an employer and the close links between the government and the employer organisations. For their part, the employers feel that the government’s role is not to guarantee the competitiveness of countries.
Frédéric Turlan, IR Share