Macron Blinks in Fuel-Tax Dispute With Yellow Vests

This article originally appeared in The Wall Street Journal:

PARIS—French President Emmanuel Macron suffered the first major setback in his push to overhaul the French economy, backing off a fuel-tax increase that enraged much of the nation and sparked a grass-roots protest movement against his government.

Faced with another weekend of destructive protests by the gilets jaunes—or yellow vests—Prime Minister Édouard Philippe told a press conference on Tuesday that the tax increase would be pushed back six months to allow for public discussion. The worst riots to hit Paris in decades erupted during antigovernment protests on Saturday, leaving the city’s shopping and tourist center dotted with burning cars and damaged storefronts. Protesters vandalized the Arc de Triomphe, rattling Mr. Macron’s administration and the country.

The protests have become a test of Mr. Macron’s resolve to forge ahead with his broader agenda, particularly his plans to make France more business-friendly. The concession marked the first time the Macron government has blinked since the former investment banker took office in the spring of 2017.

Mr. Macron won the presidency on a platform that promised to make the French economy more competitive while also cutting pollution and preserving the nation’s generous social protections. His proposals included reduced jobs protections for workers, higher fuel taxes, cutting red tape for businesses and a repeal of much of France’s wealth tax.

The French leader has eschewed the consensus-building approach of his predecessors. Instead, he wielded his executive powers and his large majority in Parliament to defy the political opposition, unions and other groups.

In recent months, however, Mr. Macron’s approval ratings have plummeted and lawmakers in his own party have urged him to offer concessions as the gilets jaunes protests have mounted. Polls show that more than 70% of the public supports the demonstrators.

It remained unclear whether the delay was enough to thaw tensions. On social media, gilets jaunes were preparing to protest for a fourth consecutive weekend.

“It’s a small victory because he is finally backing down,” said David Roig, a 29-year-old taxi driver. “But what we want isn’t a delay. It’s the cancellation of the planned tax increase.”

The gilets jaunes — or yellow vests — movement started as a protest against higher fuel taxes but it has become a rallying cry against President Emmanuel Macron’s economic policies. Their latest demonstration resulted in riots in Paris that led to hundreds of arrests and injuries.
Mr. Macron has much left to accomplish from his agenda. In a speech to his ministers in November, he set the goal of making France “an environmental power of the 21st century.” He is also planning overhauls of the country’s pension system and schools, along with the elimination of tens of thousands of civil-service posts.

Mr. Macron’s agenda also suffered a setback on Tuesday in Brussels, where eurozone finance ministers refused to back French proposals for a sweeping overhaul of the bloc. Mr. Macron made shoring up the currency area a centerpiece of his campaign to prevent a repeat of the crisis that nearly tore the eurozone apart several years ago.

The finance ministers agreed on several measures Mr. Macron backed, including using the eurozone’s bailout fund as a backstop to resolve failing banks and an easing of terms for governments to borrow from the fund.

But there was no deal on a common eurozone budget to fund government spending in nations hit with economic downturns, a goal of Mr. Macron’s. Nations such as the Netherlands and Finland oppose pooling their taxpayers’ money for such purposes. Ministers agreed only that work could start on designing a budget to improve the bloc’s competitiveness and to help poorer economies converge with wealthier ones. The size of that budget has yet to be discussed.

“We would have liked to go further,” said French Finance Minister Bruno Le Maire, “but we knew that for certain governments, this wasn’t possible.”

The gilets jaunes movement largely has rebuffed the government’s appeals to negotiate, discouraging any representatives from sitting down with officials. A few gilets jaunes who were preparing to meet with Mr. Philippe on Tuesday canceled after receiving threats from more radical factions of the movement.

The protests have exposed the weakness hidden behind Mr. Macron’s large victory over far-right opponent Marine Le Pen. He assembled a winning coalition of centrist voters, but just 42% of registered voters backed Mr. Macron as unprecedented numbers of French left their ballots blank or abstained. Many gilets jaunes come from this segment of the French electorate, deeply skeptical of his centrist, business-friendly policies.

While the fuel-tax proposal spawned the gilets jaunes, the movement has since embraced a broader antigovernment agenda, accusing Mr. Macron of being a champion of the rich at the expense of the working class.

The tax proposal, aimed at simultaneously raising revenue and cutting automobile pollution, was a hallmark of Mr. Macron’s technocratic leadership style. Economists say such consumption taxes that reduce pollution and other harmful effects are an efficient way for the government to raise revenue.

That approach, however, alienated swaths of French people who live in rural and suburban areas and rely on their cars to reach their jobs in city centers. It also compounded the public’s perception that rural France has borne the brunt of globalization’s impact, as forces such as e-commerce and big-box retail have left villages and towns hollowed out.

The result: Hundreds of thousands of people flocked to Paris and other cities around France, blocking roads, clashing with police and demanding Mr. Macron’s resignation.

On Tuesday, Mr. Philippe called for a nationwide “consultation” to discuss fiscal policy and public services outside of major cities. He also said there wouldn’t be any increases in the price of natural gas and electricity over the same six-month period.

“The government has made proposals,” Mr. Philippe said. “Let’s talk about it. Let’s improve them, complete them, I am ready for it.”

Write to Matthew Dalton at [email protected] and Noemie Bisserbe at [email protected]