(Bloomberg) -- France's state auditor said the public pension system's deficit is set to widen sharply in coming years, sounding a warning ahead of negotiations that are crucial for the survival of Prime Minister Francois Bayrou's government.
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The report from the Cour des Comptes is the first step in three months of talks between labor unions and business federations on revising President Emmanuel Macron's deeply unpopular 2023 pension law that is gradually raising the minimum retirement age to 64 from 62.
Opposition parties are pushing to at least partly reverse the changes to the age threshold, but shaky finances will limit the margin for maneuver.
The Cour des Comptes said a surplus in 2023 was a one off that will reverse as soon as 2024. Without changes, the annual deficit will continue to deteriorate, reaching €15 billion in 2035 and around twice that by 2045.
"The financial outlook to 2045 presented in this report is worrying," the state auditor said. "The favorable effects on the balance of the system linked to the 2023 reform should weaken and the overall deficit should deteriorate sharply."
Reopening France's explosive pension debate was the central concession Bayrou offered to Socialist lawmakers in January to keep them from voting his government out of office over the budget. If the outcome of talks fails to satisfy opposition groups, he would face renewed no-confidence votes like the one that led to the ouster of the previous government in December.
Bayrou promised parliament can work on legislation based on any agreement that emerges from the union talks, but said proposed changes must not worsen the financial balance of the vast public system. He commissioned the Cour des Comptes to settle a long-running debate over exactly how big the pension deficit is.
Macron's 2023 pension reform sparked mass protests as unions and opposition parties said raising the minimum retirement age to plug financial holes in the system unfairly penalized low-skilled workers who began their careers at a young age.
The government at the time pushed through the legislation despite the outcry as it excluded attempting to balance the system by reducing pension payments or increasing the contributions paid by workers and employers.