(FORTUNE Magazine) – Reducing entitlement programs is a hot political button in the U.S.--think of the fractious Medicare battle. But in France such reform is no mere economic debate. France isn't a welfare state, it's a welfare republic, the very birthplace of the commune, and the country proudly wears the mantle of its socialist heritage.

That mantle--social security, pensions, and state-owned industries and services--has grown too heavy and expensive. Yet when Prime Minister Alain Juppe proposed pension and social security reforms for public employees, they responded as though he had threatened liberte itself.

Over three momentous weeks, strikes by postal, transport, and other government employees snarled the country: half a million marchers in major cities on November 24; 750,000 on December 5; and a million a week later, according to the government's (probably understated) figures. Public transportation stopped dead, cities clogged with traffic, and hour-long hikes to work in a frigid early winter became the norm for private-sector workers.

France's obligations under the European Union's 1992 Maastricht Treaty--the blueprint for a common currency and an open market--are the focal point of the trouble. The treaty mechanism sets stiff criteria for membership in the European Monetary Union (EMU), including reducing public budget deficits to 3% of GDP by 1999--or half the country's current level.

French unions don't care one sou for reforms that entail slashing government services and boosting taxes. But in September, Juppe hiked payroll and VAT levies and created new ones, raising the share of the GDP claimed by taxes to a record 44.7%. "It's bleeding the French," said Jean-Louis Corvaisier, a national delegate for the Communist-dominated General Confederation of Labor.

On November 15, when Juppe introduced a reform--cutbacks really--of the social security pension system, the brie hit the fan. Juppe's plan calls for workers to contribute 40 years of payments to get a full pension instead of the current 37.5 years. Benefits would be calculated at 75% of the best 25 years of salary instead of the best ten years; early retirement for subway drivers and 18 other occupations would be slowed.

The reform would also have required large numbers of government workers to join private plans, as Americans do. "For us, private is not a synonym for better," said Christine Morelle, general secretary of the Tax Collectors Union.

Maastricht or not, social security is a luxury the French cannot afford. Created at the liberation in 1945, the system covers 95% of the population against illness, and after retirement. Like the U.S., current workers pay for the ill and aged, through stiff payroll taxes on both employer and employee.

That was fine while France had a young, fully employed work force, but since the 1970s oil shocks, the system has steadily amassed deficits--now at $46 billion, rising by at least $12 billion annually.

Maastricht also sent the EU members on the path to unfettered capitalism. Industries previously monopolized by state-owned companies (such as airlines, telecoms, railroads, electricity) must be opened to European competitors by 1998. The unions fear job cutbacks.

The unrest reminds many Frenchmen of the revolutionary fervor of May 1968. But there's one ironic distinction. In 1968, said union chief Corvaisier, "we talked about alternative models of society, like Maoism or communism. Today we are talking about maintaining our benefits--about full employment, jobs for the young, retirement." The goal, in other words, isn't to smash the state, but to make the state keep its promises. The present crisis shows that those promises will be just as costly to break as to keep.

--Mark Hunter