France is going through a major social crisis resulting from the government will to reform the pension system. The promulgation of the law including the postponement until 64 years old of the legal retirement age is not going to put an end to the dissent. In the same time the Paris stock market is breaking records. The CAC 40 index has even registered at the end of last week the highest increase among the major financial markets with +16.2% since the beginning of the year against 7.8% for the SP500 in New York, 13.5% for the German DAX and 5.6 % for London whose market capitalization is now inferior to Paris one, an unprecedent situation. How to explain this paradox?

The social crisis results from the conjunction of three factors, the nature of the measure, the used method and the social and economic context. It is first unappropriated to utilize the word reform. The equilibrium of the French system and of its general regime depends from parameters which evolve during the time, demography, wages, employment and inflation which have consequences on benefits and resources. It is so logic to regularly adapt the parameters and it is what have done the successive governments from the beginning of the Eighties when the demographic turnaround and the evolution of employment have fundamentally changed the conditions of the regime equilibrium, but without putting into question the allocation principle.

The government, after its predecessors have renounced to a radical transformation which would have lead to the capitalization system and the creation of pension funds, inscribed its policy into the logic of the modification of the parameters. It has chosen to come back to balanced accounts through the postponement of the retirement legal age until 64 years. This measure was necessarily unpopular because it did not take into account the nature of the carriers. There is nothing in common between the life of an office employee and these of construction workers or truck drivers. It was also unequal because it penalized women.

The financial benefit of this choice was also disputable because it seemed to ignore the French job market specificity with a very low activity rate of the employees above 60 years old. These ones so will remain for a longer time as unemployed or, if they have no more unemployment benefits, they will be dependent from costly social benefits. The choice to include inside the reform the abolition of public services special regimes, which are essential as in transportation and energy, have also given to the social movement a larger extent and an increased repercussion on the country economy.

The companies, in these sectors, have already difficulties to hire workers for jobs which affect their private life as the obligation to be available at any time, during the evening, the week-ends and the holidays seasons. The historical choice made to attract them was based on advantages as free travels or natural gas and electricity consumption along with an adjusted career duration. That was avoiding to have an attractive and so high remuneration costs. The putting into question of these status, with limited financial consequences, create atop of that, in these enterprises a major worrying for the social climate inequality between employees already in function who keep their advantages and the new ones.

The progressive increase of the contributions ceilings for the general retirement regime would have allowed to obtain the same financial results without provoking such a social crisis. The complementary regimes have at their disposal very important structural surplus and reserves. They could have so contributed to the rebalancing of the whole system.

The chosen method is also by large responsible for the observed rejection. The concertation must not be limited to the organization of meetings where everyone plays his role but where no room is made to suggestions by the different involved parties. It has not been asked to social partners for making alternative proposals, based on figures which could have been the purpose of debates and between which a choice could have been done.

At last, the economic context is especially unappropriated to ask the employees to make sacrifices and to work longer. It has been affirmed that the employment situation was improving and that the international comparisons were in favor of France. It is better than elsewhere and than if it was worse. But this reasoning is rejected. Without talking about the disastrous results of the French foreign exchanges which could, one day, have heavy consequences on the economy, unemployment remains very high and inflation, even if it is inferior to the average of the observed levels of our neighbors, is at the origin of a significant diminution of the purchasing power. It is so difficult to ask for sacrifices in a context of precariousness and increased poverty. During that time, stocks market break records.

This paradox first comes from the composition of the CAC 40 which includes the giant luxury groups which profit from the Chinese recovery and three big banks whose shares have rebounded after the Crédit Suisse crisis and the defaults of several American banks. But this explanation is not sufficient. The accommodative monetary policy of the European Central Bank has more profited to the financial markets than to enterprises and household. The abundance of liquidity has been, at least partly, invested in shares. The interest rates increase has only brought them at a level by large inferior to inflation one and the reduction of public purchases program by the ECB has been enough progressive not to alarm financial markets.

After, the euro has appreciated against the dollar which has increased the appetite of the international investors for the European markets and the Paris one has taken profit from that.  But this situation is not without risk because the worries about the American economy are not going to be subsided and the indebtedness of the public and the private agents makes us remembering a situation which has leaded to the sub-prime crisis. The internal political tensions, with the lack, in the Congress, of a majority to increase the public debt ceiling, could provoke a crisis which would have repercussions by far outside the country. To that must be added the new fragility of the banks, which, due to the digitalization of the transactions can be confronted with massive and immediate bank runs to which they are not able to come up to expectations without putting in danger their survival. New prudential regulations are so indispensable but it will take time to define them and to put them into application.

So, the contrast between a tense political and social situation in France and the prosperity of the enterprises which have as a consequence the increase of the stock market values has not been ignored by the investors. If they are still confident regarding profit levels, they become much more cautious about public debt. The spread between the rate of the Ten years German Bund and the French OAT with the same maturity was during these last year between 30 and 40 basis points. It has just strongly increased to overpass now 50 basis points. That is going to weight on the public debt charge and that will be passed on the interest rates offered by the banks, hurting their strength along with weighting on investments, especially in the real estate sector.

It is not anymore possible, despite the current stock market euphory, to totally avert the risk that, to the political and social crisis the country is confronted with, will be added a financial crisis. It is why it is urgent the government changes its method and listens the suggestions of the social partners in the domains which directly regards them.