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Macron blinks as Yellow-Vests protest forces fuel-tax climbdown

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French president Emmanuel Macron 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

[PARIS] 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 impact on French finances, the retreat raises questions about a set of reforms Mr 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 televised 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.

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

Mr 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 Mr 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.

Mr 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."

The cost of the tax freezes is estimated at around 2 billion euros (S$3.1 billion), Le Parisien reported, without saying where it got the information.

Ecology Minister Francois de Rugy told RMC radio Nov 30 that a three-month moratorium on planned fuel-tax hikes, less than what Mr Philippe announced, would lower government revenue by 650 million euros. 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 per cent 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," Mr 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."

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."

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 Mr 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 per cent at 2.45 pm in Paris, broadly in line with declines elsewhere in Europe.

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