The French will have to work two years longer before retiring and the rich will pay higher taxes in an effort to drag France’s welfare budget out of the red, the government has announced in a long-awaited pension reform.

Under the terms of the plan, which is likely to meet stiff union resistance, the minimum retirement age will be gradually lifted to 62 by 2018 against 60 at present, Labour Minister Eric Woerth told reporters.

“Working longer is inevitable,” Woerth said. “All our European partners have done this by working longer. We cannot avoid joining this movement.”

President Nicolas Sarkozy hopes the reform will convince jittery investors that he is serious about cleaning up heavily indebted state finances and enable France to cling onto its precious AAA sovereign debt rating.

However, trade unions have threatened to battle a rise in the retirement age, and the plan could yet be sweetened before it goes to parliament for ratification in September.