Austerity plans advance in France and Spain

The French government proposed a series of measures Wednesday to rein in the budget deficit, including raising the retirement age by two years and increasing income taxes on the rich.

Spain also was set to announce contentious plans to shake up its labour market Wednesday, as countries across the euro area respond to investor fears about public finances.

In France, the minimum age for retirement will be lifted gradually by 2018 to 62 from the current 60, the minister for labour, Eric Woerth, told reporters. The government had considered raising the age to 63.

“It looks like a major step forward,” said Jean-Michel Six, chief European economist at Standard & Poor’s. He said the announcement appeared to be a compromise between the demands of investors for deep budget cuts and the need to retain a sense of social equality.

France has been slower than other European countries like Spain, Portugal and Britain to announce fundamental budget changes, partly reflecting the fact that its budget deficit is lower, while investor demand has kept the interest rates that France pays on its debt low relative to most euro-zone countries.

“Working longer is inevitable,” Woerth said. “All our European partners have done this by working longer. We cannot avoid joining this movement,” he added. Increasing the minimum age of retirement “respects the fundamental principals of justice,” Woerth said.