| You may remember Jack Nicholson’s classic performance in “A Few Good Men,” defiantly roaring: “You can’t handle the truth!” This came back to me while watching Prime Minister Francois Bayrou try to rally left-wing parties to his cause with the promise of another hard look at the painful topic of pensions. While dangling the possibility of rolling back the recent hike to the retirement age, Bayrou warned any change would need to be backed by real data and facts. One has to wonder if France can handle the truth. It’s no secret that the sustainability of its pension system is crumbling in the face of demographic decline and falling productivity. The expected annual pension deficit is of around €15 billion by 2030, in a country that already spends over a quarter of its budget on social welfare. Jacking up the retirement age, as Emmanuel Macron did in 2023, may be a crude and unfair tool — but it is also a very effective and straightforward way to keep people paying into the pot longer.  Bayrou’s renewed search for the truth seems to be guided by a belief that the current system’s costs are even higher than thought, due to a complex web of civil-service pensions and state transfers. He might also do well to focus on the demographic side of the argument, which is easier to understand and only getting worse. French statistics office INSEE this week published data showing a rise in deaths and a 2.2% drop in births in 2024, falling to the lowest level since World War II. Immigration is picking up the slack in terms of overall population growth, but with the risk of political backlash. Economist (and former Bloomberg colleague) Maxime Sbaihi’s new book, “Les Balançoires vides,” offers an essential dose of sobering reality in regard to what awaits aging societies like France. Falling birth rates are a “trap” that is very hard to escape, he writes: An aging population means younger generations become less well off, which impacts their ability to have children, which depresses fertility rates further. This issue of inter-generational equality — Sbaihi cites weaker economic growth and pricier housing as two worsening pain points for the young — should be what drives the pension debate, not nostalgia for how good the last generation had it. What’s ultimately at stake is France’s ability to invest in the future. Bloomberg Economics estimates that halting pension reform could create a 1.2% hit to GDP by 2050 and lift the debt ratio by almost 15 percentage points to 185% of GDP (from expectations of 170%). The truth hurts: it can also be quite expensive. Prime Minister Bayrou survived his first no-confidence motion in France’s highly fractious parliament on Thursday as the far-right and Socialists abstained in the vote. French businesses continue to face heightened uncertainty from the country’s prolonged budget crisis, contributing to a sluggish economic outlook, the Bank of France said. Geneva-based SGS is in advanced talks to join forces with Bureau Veritas SA, in a deal that would create one of the world’s largest testing and certification companies with a combined market value of almost $35 billion. Saipem SpA is struggling to drill foundations for a wind farm off France’s northwest coast, where it’s on the hook for hundreds of millions of euros in cost overruns, people with knowledge of the matter said. Tencent Holdings Ltd. And Ubisoft Entertainment SA’s founding Guillemot family are considering creating a new venture that would include certain Ubisoft assets as they seek to boost the French video-game company’s value, people familiar with the situation said.  A huge billboard advertisement for Ubisoft’s Assassin’s Creed 3 video game ahead of the Electronic Entertainment Expo in Los Angeles, in June 2011. Photographer: Jonathan Alcorn/ The new French government plans to limit temporary levies on companies to one year and will instead focus on taxing the rich as it seeks ways to narrow the deficit, according to Budget Minister Amelie de Montchalin. Monday: Bloomberg Jan. France Economic Survey Thursday: French January business and manufacturing confidence Friday: French January preliminary PMI data Traveling slow means traveling in style. The Venice-Simplon-Orient-Express is harking back to the world that was with a once-a-year itinerary on the legendary sleeper train: Paris to Istanbul in six days, with stops in Budapest and Bucharest for guided historic tours.  The dining car on the Venice Simplon-Orient-Express. Source: Belmond | 
