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updated 11/10/2010 2:04:05 PM ET 2010-11-10T19:04:05

Nicolas Sarkozy may want to keep the pen as a souvenir.

The unpopular French leader has raised France's retirement age to 62 from 60, scoring a much-needed victory after a showdown with labor unions over a reform central to his presidency. The measure became law Wednesday, a day after he signed it. 

France now becomes the latest country in Europe where protesters have largely failed to halt a drive for austerity by heavily indebted governments. Workers upset over austerity measures have repeatedly disrupted London's Tube subway and also shut down highways, ferries and even the Acropolis in Greece, to no avail.

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As Sarkozy prepares to take leadership of the Group of 20 world economies Friday, the European retrenchment sits in stark contrast to the heady growth rates in rising Asian countries like China and India.

Sarkozy's conservative government insisted the reform, requiring workers to stay on the job two years more, was needed to save France's money-draining pension system.

"(I am) fully aware that this is a difficult reform. But I always considered that my duty, and the duty of the government, was to carry it out," he said in a statement Wednesday.

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Sarkozy is savoring success four years after his predecessor, Jacques Chirac, backed down on a labor reform that would have made it easier to hire — and fire — young workers because of huge protests.

The French president stuck to his conservative mantra even as striking French workers created travel chaos, gas shortages and garbage pileups and shut down ports and schools.

Unions had argued that retirement at age 60 was a cornerstone of France's social benefit system. But the government said the entire pension system must change because the French are living longer — an average of nearly 85 years for women and 78 for men.

The minimum retirement age in France is now 62 instead of 60. Those who want to claim full pension benefits must now wait until age 67 instead of 65.

France's pay-as-you-go system is expected to come under more strain as the number of people drawing a pension rises relative to the number of working people whose taxes fund that benefit.

The pension population is rising as baby-boomers born in the years after World War II flood into retirement.

Governments in other heavily indebted European countries have also faced public anger as they try to cut spending. Tens of thousands of students protested Wednesday in London against plans to triple university tuition fees.

Sarkozy has not yet announced whether he will run in the 2012 presidential election. But with the retirement fight behind him, he can now try to rebuild his popularity at home. During the debate, his approval ratings hovered near their lowest levels since he took office 3-1/2 years ago.

Union leaders sought to make the best of the setback, arguing that Sarkozy had set the stage for a tough debate over social policies in the next presidential campaign.

In the end, Sarkozy and his allies built their case on the perception that French workers had it a bit too good, causing Europe to lag while busy workers in places like China and India are propelling their economies ahead.

Socialist President Francois Mitterrand cut the retirement age from 65 to 60 in 1982, when France was fresh off a postwar economic boom known as "Les 30 Glorieuses" — the glorious 30 years. Sarkozy's conservatives argued that France was paying for that move today, when many European governments have seen tax revenues dry up and deficits soar because of far more sluggish growth.

Some labor leaders acknowledged that the tough economic backdrop weakened their hand.

Simon Tilford, chief economist at the Center for European Reform in London, says Sarkozy "had no choice" other than to get the reform through because otherwise France's — and his — credibility would have suffered.

"For anyone outside of France, this looks like a pretty modest move forward," he said. "Other EU countries are moving much much more rapidly" on pension reform.

France has the highest life expectancy in Europe but still one of the lowest retirement ages, prompting Tilford to predict that retirement issues will come up again before markets believe that France has its finances in order.

"A retirement age of 62 is still far far too low," he said.

The Associated Press and Reuters contributed to this report.

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