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

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

By 2070, nearly one in three French citizens will be over 65, while the working-age population shrinks by more than 3 million, the head of the Cour des Comptes, Pierre Moscovici, said presenting a report on demographics and public finances.

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

France's public spending is among the world's highest at 57.3% of GDP, but if pension and welfare benefits per person remain unchanged, it could soar past 60% by mid-century, a threshold only briefly breached before 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 due to the fact that 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," 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 last month 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 next year.

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

(Reporting by Leigh Thomas; Editing by Andrew Cawthorne)