Macron takes U-turn, puts off fuel tax hike after 'yellow vest' protests

French President Emmanuel Macron’s government reversed course and suspended a planned fuel tax hike that had sent as many as 3,00,000 protesters into the streets for three weeks in sometimes violent clashes.

Prime Minister Edouard Philippe announced the decision after detailing the plan in his regular Tuesday morning meeting with governing party lawmakers.

“No tax merits putting the nation in danger,” Philippe said in a televised address. The measures he announced didn’t include the supplemental increase in the minimum wage demanded by protesters.

The climbdown is a rare retreat by Macron, who has prided himself on sticking to his policies and ignoring his tumbling popularity ratings. He’s consistently defended the higher gasoline taxes, saying they are needed to wean the country off fossil fuels and have been compensated for by cuts to payroll taxes.

Even before it was officially announced, Members of Macron’s Republic on the Move saluted the turnaround, saying it would help calm Yellow Vests protests. Yellow Vests and opposition parties said it was too little, too late.

“It’s a first step that could have come weeks ago without all the rancor,” Benjamin Cauchy, an early organizer of the Yellow Vests, said on BFM TV. “But the French won’t be satisfied with just crumbs, they want the whole baguette.” He said he wanted all recent gasoline tax hikes rolled back, and higher taxes on multinational companies.

Stanislas Guerini, the head of Macron’s party, said on RTL Radio that a moratorium on new gasoline taxes would allow a debate on France’s energy policies to take place in a “calmer atmosphere.”

Marine Le Pen, head of the far-right National Rally party, which has supported the Yellow Vests in hopes of capturing their votes, said on Twitter that “a moratorium is just a delay. That clearly doesn’t live up to the expectations and the precariousness in which the French people are struggling.”

Markets showed little reaction: The benchmark CAC 40 stock index was down about 0.7 percent at 12:45 a.m. in Paris, broadly in line with declines elsewhere in Europe.

The turnaround comes as Macron’s 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, vivid televised images of whom have been shown worldwide, have defaced the Arc de Triomphe, burned hundreds of cars and blocked roads and fuel depots. Now they 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.

Rising deficit

Ecology Minister Francois de Rugy told RMC radio Nov. 30 that a three-month moratorium on planned fuel-tax hikes would lower government revenue by 650 million euros ($740 million). 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.

The grassroots, leaderless Yellow Vests are is 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.

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. Geoffroy Roux de Bezieux, the head of the business lobby Medef, dismissed calls for a higher minimum wage in an interview with Le Parisien published Tuesday. “If the minimum wage increase has to be paid by companies, it will mean jobs destruction,” he told the newspaper.