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Macron Blinks as Yellow-Vests Protest Forces Fuel-Tax Climbdown

Gregory Viscusi and Helene Fouquet
Macron Blinks as Yellow-Vests Protest Forces Fuel-Tax Climbdown

(Bloomberg) -- Emmanuel Macron blinked.

The French president who has prided himself on sticking to his guns even as his popularity levels tumbled, has reversed course and suspended a planned fuel-tax hike that had sent as many as 300,000 protesters into the streets for three weeks, with vivid images of the violent clashes in the heart of Paris making their rounds worldwide.

In addition to concerns about its potential impact on French finances, the retreat raises questions about a set of reforms Macron has planned for next year, which involve sure-to-be unpopular changes to unemployment insurance and a unification of France’s retirement systems. Members of the grassroots group, dubbed the Yellow Vests, have already said the measures announced on Tuesday aren’t enough to end the protests.

Prime Minister Edouard Philippe in a televized address to the nation on Tuesday said the government for six months will suspend planned increases in gasoline and diesel taxes, hikes in gas and electricity tariffs and the phasing out of tax breaks for tractor diesel. A three-month national debate will start Dec. 15 on how to fight climate change without hurting French pocketbooks.

“No tax merits putting our nation’s unity in danger,” Philippe said. “We have made propositions, maybe they aren’t perfect. Let’s talk, let’s improve them. I’m ready.”

Rare Climbdown

Philippe didn’t address many of the other demands raised by the Yellow Vests protesters -- including an additional increase in the minimum wage. Still, the climbdown is a rare retreat by Macron, whose approval ratings have sunk partly because of a view among many the French that he doesn’t listen. He has consistently defended the higher gasoline taxes, saying they’re needed to wean the country off fossil fuels and have been compensated for by cuts to payroll taxes.

Philippe said the fight against climate change would continue, and insisted he wouldn’t raise the overall tax burden or allow the country’s debt to rise. Speaking in Brussels, Finance Minister Bruno Le Maire said it was too early to say how the measures would affect France’s finances.

“But a path has been set by the president -- which is to respect our European commitments, reduce spending, reduce debt and reduce taxes,” he said. “This course will be kept.”

Freeze Tab

The cost of the tax freezes is estimated at around 2 billion euros ($2.3 billion), according to the French finance ministry.

Any tax cuts and spending increases to mollify the protesters would raise further uncertainty over the path of France’s budget deficit, which is already heading close to the 3 percent limit imposed by the European Union.

“Clearly the French don’t want new taxes or higher taxes, and we can’t leave new debts for our children,” Philippe said. “When you put French people of good intentions around a table they find solutions.”

Some Yellow Vests said the measures weren’t enough. “We didn’t want a suspension, we want the past increase in the tax on fuels to be canceled immediately," Benjamin Cauchy, an early organizer of the grassroots group, said on BFM TV. “Suspending the tax to re-instate it in six months is taking the French people for a ride. French people aren’t sparrows waiting for crumbs from the government.”

‘Macron’s Disdain’

The president’s silence drew the wrath of some. “Macron has still not deigned to talk to the people,” said Laetitia Dewalle, a Yellow Vests spokeswoman, on BFM TV. “We feel his disdain. He maintains his international engagements but doesn’t speak to the people.”

Sebastien Chenu, a spokesman for Marine Le Pen’s far-right National Rally party which has supported the Yellow Vests in hopes of capturing their votes, said on LCI that “the French won’t be fooled. The government has understood nothing, it’s just playing for time.”

Why People in Yellow Vests Are Blocking French Roads: QuickTake

Members of Macron’s Republic on the Move welcomed the measures, saying it would help calm the protests. “The prime minister has opened the door, now the protests must end,” Aurore Berge, a deputy from the Paris region told reporters after Philippe met deputies before making the public announcement. “We have reached a level of violence that is not safe for the French people and doesn’t allow this country to be reformed.”

Markets showed little reaction: The benchmark CAC 40 stock index was down about 0.5 percent at 2:45 p.m. in Paris, broadly in line with declines elsewhere in Europe.

Violent Protests

Macron’s backing down comes as his popularity hit a new low. A poll by Ifop for Paris Match magazine and Sud-Radio released Tuesday found the president’s support had fallen six points to 23 percent. Philippe was at 26 percent. While Macron and parliament, where his party holds a majority, don’t face new elections until 2022, the reversal on taxes may undermine the rest of his reform agenda.

The protesters, who started out blockaded traffic across France, brought their fight to Paris over the last two weekends. They defaced the Arc de Triomphe, burned hundreds of cars and blocked roads and fuel depots.

The protests are expanding. High school students, ambulance drivers, and farmers are demonstrating over unrelated demands -- all in opposition to Macron’s policies, which are seen as too favorable to businesses and the wealthy.

PSG Match

The grassroots, leaderless Yellow Vests -- named after vests that all motorists must keep in their cars -- are struggling to structure themselves. Philippe’s office said that a meeting planned later Tuesday with self-declared representatives of the movement had been canceled; invitees were said to have received death threats from fellow protesters.

Philippe warned that the government would “mobilize everything” to ensure another round of protests planned Saturday in Paris doesn’t degenerate into the violence seen the past two weekends.

Business leaders are warning economic damage from the protests, with the country’s retailers federation saying declines in sales have reached 40 percent in some parts of the country.

Meanwhile, the local football club, Paris Saint-Germain, said it has been asked by the police to postpone its Saturday game against the Montpellier team, citing security concerns.

--With assistance from James Regan, Francois de Beaupuy and Angeline Benoit.

To contact the reporters on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net;Helene Fouquet in Paris at hfouquet1@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Vidya Root, Geraldine Amiel

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