The French government rolls back a planned fuel tax hike, but the protests are widening
French President Emmanuel Macron’s reforms programme could be at risk of losing steam in the wake of weeks of violent countrywide protests triggered by a proposed increase in the fuel tax. Paradoxically, as head of the centrist La République En Marche party, he had swept to power on a pledge of modernising the economy and restoring popular trust in politicians. Public anger against the fuel tax has escalated into a broad-based opposition to the government’s overall policies. Prime Minister Edouard Philippe initially said the duty hike would be deferred for six months. But on Wednesday the government cancelled the tax proposal altogether, arguing that a levy that was meant to induce motorists to go green was not worth the price if it undermined social cohesion. Mr. Philippe has also suggested that the introduction of additional safety checks on cars due to take effect next year could be delayed. The U-turn on measures to reduce CO2 emissions suggested that the government was on the back foot. The government has also said that it was open to reinstating the wealth tax, which was revised last year to narrow its scope. The measure was intended to improve the investment climate and boost growth and employment. But the accompanying flat tax rate on capital gains and dividends, besides limits on trade unions to negotiate wages, only served to reinforce Mr. Macron’s image as a President of the rich.
The yellow-vest protests have shone the light on France’s tax system, its rates said to be the highest in the European Union, and buttressed the demand for improvements in the standard of living. The government is committed to increasing the minimum wage from next year but could now face pressure for further concessions on social welfare. Conversely, Paris would also be constrained to demonstrate compliance with EU rules that set an annual fiscal deficit target of below 3% of GDP on member-states. Adherence to common norms would especially be on Brussels’s radar after the recent stand-off involving the Italian government. A concern linked to the withdrawal of the tax increase is the rise in France’s carbon emissions. The mass protests have, unwittingly, pitted the majority who would have been hit by the higher levy against the imperative to meet the Paris climate agreement targets. Mr. Macron, who has fashioned himself as a champion of the green cause, can realise the mission to combat global warming only by rallying his people. His ability to regain lost ground will determine the prospects of warding off the populist threat in the 2019 European Parliament elections. His handling of the challenges at home will crucially define his ambitions on the EU stage.