Santa Macron blows hole in budget
Concessions to buy off protesters set to breach EU deficit
limits.
By PAUL
TAYLOR 12/10/18, 11:45 PM CET Updated
12/11/18, 8:36 AM CET
The political cost to Macron’s authority and European
standing are already high | Ludovic Marin/AFP via Getty Images
PARIS — Santa Claus came early for millions of French people
on Monday.
But President Emmanuel Macron’s efforts to buy off a
nationwide protest movement with handouts for low-paid workers and retirees is
likely to come at a cost — inflating the budget deficit, pushing the national
debt over 100 percent of gross domestic product and reneging on EU commitments
to fiscal discipline.
After a month of a sometimes violent revolt by Yellow Jacket
protesters against fuel tax hikes and the cost of living, Macron announced an
immediate €100 a month increase in the minimum wage without extra cost to
employers, the removal of social charges and income tax on overtime payments,
and the scrapping of a tax rise on poorer pensioners.
The young president admitted in a televised address to the
nation that he had underestimated public anger, failed to grasp the distress of
families and the elderly struggling to make ends meet, and offended people with
arrogant or offhand remarks.
“I accept my share of responsibility. I may have given you
the feeling that I didn’t care, that I had other priorities,” a chastened
Macron told prime-time viewers.
The political cost to Macron’s authority and European
standing are already high | Jeff J Mitchell/Getty Images
He gave no clue as to how he would finance the concessions,
which together with last week’s scrapping of contentious planned tax hikes on
gasoline and diesel could lead to at least €10 billion in lost revenue and an
extra cost to the 2019 budget — roughly 0.5 percent of GDP.
The president refused to go back on his unpopular 2017
decision to scrap a wealth tax on the rich, which yielded €4 billion but was
hated by investors who cited it as a barrier to creating jobs. But he said he
would meet investors and business leaders in the coming days to see how they
could contribute more to the economy.
Activists from the leaderless Yellow Jackets movement, which
has spread like wildfire via social media, acknowledged first steps had been
taken to meet their demands but many said Macron’s response was inadequate and
vowed to keep up their roadblocks.
However, the government is hoping a combination of targeted
measures, protest fatigue, revulsion at violence and looting, and the onset of
the Christmas holidays will snuff out the protests before the end of the month.
Italy’s populist leaders, who have openly defied Brussels
with a rule-busting increased budget deficit for 2019, must be laughing.
The political cost to Macron’s authority and European
standing are already high.
The pro-European president pledged when he was elected in
May 2017 to finally respect France’s EU commitments on budget discipline,
saying this was vital both to restoring public finances and to rebuilding
trust, notably in key partner Germany.
But while increased growth and tax measures brought the
deficit below the EU’s 3 percent ceiling last year for the first time in almost
a decade, the centrist government has so far failed to cut public spending,
which at 57 percent of GDP is among the highest in Europe.
The European Commission has already voiced concern about the
feasibility of Paris’ plans to shave the deficit to 2.8 percent of GDP next
year. That modest reduction now looks unattainable, not only because of
Macron’s latest giveaways but also because the economic disruption of a month
of protests is set to reduce growth this year and make next year’s 1.7 percent
growth target, on which the budget is based, hard to achieve.
Italy’s populist leaders, who have openly defied Brussels
with a rule-busting increased budget deficit for 2019, must be laughing.
Although Rome, which is facing an EU excessive debt
procedure, is a separate case and of greater concern to financial markets,
Commission Vice President Valdis Dombrovskis said the Commission was watching
France’s situation closely.
The Bank of France halved its growth forecast for the final
quarter of 2018 on Monday to 0.2 percent from 0.4 percent. Retailers said
supermarket sales were 15 percent to 20 percent below normal for the fourth
straight Saturday due to the blockades and fears of violence.
While the president did not say how he planned to achieve
the promised €100 increase in the minimum wage, which affects 1.6 million
people directly and 11 million through knock-on effects, an increase in a
state-funded income supplement known as the “activity premium” seems the most
likely way to avoid extra cost for employers.
French presidents for the last 25 years have been forced to
retreat from economic and education reforms by street protests. Macron’s
predecessors Jacques Chirac, Nicolas Sarkozy and François Hollande retreated
into immobility after bruising outbursts of public anger.
Despite his determination to be different, and his youthful
energy, Macron started down the same road on Monday. Whether he can restore his
authority and revive his reform agenda looks far from certain.
Paul Taylor, contributing editor at POLITICO, writes the
Europe At Large column.
The protests by the yellow vests against French President
Emmanuel Macron aren't showing any signs of letting up despite concessions made
by the government. Where is this anger coming from?
By Julia Amalia Heyer and Katrin Kunt
December 10,
2018 06:17 PM
A drama has been playing out in the streets of France in
recent weeks, an intentionally theatrical rebellion against Emmanuel Macron,
the man who has governed France for the past 19 months. Some of the very people
who voted for Macron have now taken to the streets to demonstrate against him.
The gilets jaunes, or yellow vests, want to storm the Élysée
Palace, and chase him out, like a 2018 version of the Paris Commune, spurred by
their dissatisfaction with a fuel tax that was meant to be imposed in January.
The tax increase has been called off, but that so far hasn't been sufficient to
appease them.
For Macron, for his credibility and authority, which he has
orchestrated publicly like few others before him, it is too much. If he ends up
having to backtrack on his policies, it will represent a U-turn and a watershed
moment for his presidency -- a point from which he will struggle to recover.
Rather than playing the role of a Jupiter, he would be an Icarus; a man who
wished to fly high, but fell. He would have to govern with clipped wings.
Almost everything he wanted to accomplish for his country is
at stake. Up to this point, he and his government had abided by the principle
that no matter what happens, they would stay the course. His aim was nothing
less than the "transformation" of France. Everything was to become
new, different.
But now it appears things could turn out very differently.
Will this president, with his penchant for the theatrical and tendency to quote
Molière ad lib, manage to calm his opponents, his own people?
On Dec. 1, France saw its most violent riots since the
student uprising of May 1968, protests that resumed again over the past
weekend. They took place not only in Paris, but all across the country.
Countless cars were burned. An apartment building and a prefecture were set on
fire in the protests. Restaurants were destroyed, boutiques looted.
'Resign, Macron!'
A week ago Saturday, Place de l'Étoile, the star-shaped
roundabout at one end of the Champs Élysée dominated by the Arc de Triomphe,
became the site of a fierce battle between the police and the yellow vests
until late in the evening. By the end, the monument, which Napoleon had erected
to celebrate himself and his victories, was sprayed with slogans, like
"Resign, Macron!" and "The yellow vests will win."
The plaster bust exhibited in the center of the arc was
bashed in, a grim omen for the country. The riots and blockades of the past few
weeks have taken a gruesome toll: At least four dead, more than a thousand
injured, including police officers, protestors and passersby. More than 1,000
people have been arrested so far, and millions of euros in damage has been
caused.
People in France are no longer speaking of protests, but of
a revolt. Will it become a revolution?
All this hate and violence has been set off by the very
person who wanted to reconcile the French, as Emmanuel Macron promised the eve
of his election. He said it would be a difficult task, but it's unlikely that
even he knew just how hard it would be.
'We Will Grill You Like Chickens'
Yves Rousset, a 64-year-old official with the police
prefecture in in Le Puy-en-Velay, a small town in the Auvergne region around
400 kilometers (250 miles) south of Paris, stands as he recalls recent events.
Before his current job, he helped resocialize criminals, and he thought he was
well-suited to extreme situations. But he has trouble putting what happened at
his prefecture into words, even days later.
On the evening of Dec. 1, 150 angry people pushed their way
to the prefecture. Rousset watched as they broke windows with heavy rocks.
Molotov cocktails flew into the yard. Tractors were used to transport tires
that were then set on fire. In one wing of the building, offices went up in
flames. "We will grill you like chickens!" the protesters yelled.
When his police officers tried to push them back, rioters poured flammable
acetone on them. One of the demonstrators split open a helmet with a rock. Loud
techno music played.
"I've never seen anything like that," Rousset
says.
Le Puy is home to just under 20,000 inhabitants, its Old
Town paved with cobblestones. At night, cats wander through the empty
alleyways. The youth meet up at the celebrations for the fire department. It's
the kind of place where people know each other. The people here are rooted in
their town.
But since the police prefecture was set ablaze and videos of
the violence began circulating on social networks, Le Puy has also become a
symbol of France's new anger, and proof that it's not being expressed
exclusively in the capital, but everywhere as well.
Anyone who spends a few days in Le Puy is left wondering
what could have gone so wrong in this country that it could get to the point
where a peaceful town like this could become a tinderbox.
Rousset pulls a list out of the drawer in his desk. It
contains the demands of the yellow vests, which he has carefully written on
four pieces of paper. They want to reinstate the wealth tax, they're angry
about lawmakers in Paris who either don't go to parliamentary sessions or read
newspapers when they do. Electric cars, they argue, are not a solution.
It's a wish list from the citizens, the little people, who
no longer believe the government is doing things as they want it to. Rousset
discussed these points with the yellow vests, and he tried to convince them
that it's OK if the Macrons order new dishes for the Élysée Palace, that former
presidents should still get salaries and perks. But Rousset doesn't know if
they understood him or if they even wanted to understand him.
Forgotten France
Many are now talking about the forgotten France, about the
rural areas, largely disconnected from public life, where people eke out a grim
marginal existence. They say that in places like Le Puy, the anger is building
among people who only want to see everything burn.
French President Emmanuel Macron
imago / Starface
French President Emmanuel Macron
When Macron traveled through France during his election
campaign, he often spoke of the "feeling of degradation" he witnessed
in some places. He wanted to fight against it, he said. But perhaps he should
have done more to heed his own advice. When people picture him, they don't
exactly conjure up images of him visiting remote villages. The yellow vests'
revolt is also one of the rural areas against Paris, led by French people who,
contrary to what is often said about them, do not belong to the middle class.
It is the little people, the "class populaire," or working class --
those to whom Macron promised social advancement and who voted for him instead
of the Socialists in response and helped secure his win.
These people feel degraded, even if that is more of a
sentiment than reality. Le Puy is a good example. The city and the department
in which it is located are neither rich nor poor. The region is structurally
weak, but unemployment is below the national average.
'Our Anger Is Legitimate'
Marine stands at one of the traffic circles that has been
occupied by the yellow vests in Le Puy. Until recently, she made 1,400 euros
per month working in a tobacco shop. She says she is opposed to violence, but
that they could no longer put up with what is happening. "Our anger is
legitimate," she says. "We want to eat organic vegetables sometimes,
too, not just noodles."
The people with the raging mob who demolished their own
prefecture presumably had a job, a small house, a car, and could feed their
families. They are radicalized by their fear of decline, which is stronger in
France than it is elsewhere in Europe, even though the poverty level in the
country has been stable for over 20 years, and even though France has the most
generous welfare state in Western Europe.
If you were to try to sum up the yellow vests, as varied as
they may be, one would describe them as pessimists and people who trust
nothing, especially not things that take a long time. And democracy takes time.
These days, they only rely on themselves -- and, if necessary, on their own
capacity for violence. They have also registered that this can be effective
given the zig-zagging by a government that appears to be increasingly unstable.
It might also be that people in France feel particularly neglected because
inequalities seem even crueler in a country that constantly invokes the noble
virtue of equality.
In his 2014 book "La France périphérique (Peripheral
France)," Christophe Guilluy describes how geographic segregation leads to
social fault lines. These days, Guilluy's ideas are being widely discussed. The
day after Macron's election victory in May 2017, he was sitting in a café on
Place de la République, an angular man in his early fifties. He said, unmoved, "This
time, Macron won, but the next time it could be Le Pen or another
populist." He explained that it was as if the French were on tectonic
plates and the weight of their society was constantly shifting from one side to
the other. "Everything could capsize at any time." He said Macron's
challenge was to see to it that the weak can also benefit from the country's
prosperity. But it was also apparent that he didn't believe Macron would
succeed in doing that.
At the moment, it looks as though Macron didn't pass the
test. The president, for whom everything seemed to be so easy, is suddenly
having a tough time. He's silent when he should be talking, and when he does
speak, he is no longer striking the right note. Macron, of all people, is
becoming the target of an anger that has been growing for years, and even
decades. He is paying for others' mistakes, which is, on the one hand, unfair,
but, on the other, understandable.
Little 'Backing Among the Populace'
On the Left Bank of the Seine, in a stately villa that looks
like the one set on fire by yellow vests on Dec. 1, political researcher Luc
Rouban is sitting in a small, cramped office. Rouban is friendly and atypically
down-to-earth for this part of France. He gets right to the point: "Macron
never impressed me," he says. In the summer, he published a book called
"Le paradoxe du Macronisme" (The Paradox of Macronism) in which he
analyzed why he believes Macronism will be little more than a chimera, an
illusion.
Rouban had started the book in early summer, before one of
Macron's bodyguards assaulted a protester and set off the government's first
true crisis. Rouban spent months researching the composition of the National
Assembly and determined that the new lawmakers might be younger and there might
be more women than before, but that there probably had never been so many
people with similar backgrounds in the French parliament. He said they are
educated and wealthy to an above-average degree, making them representative of
only a tiny part of France.
"Macron doesn't have any backing among the populace.
Those who want what he wants are very few," Rouban says. Macron's
political base of people who really share his opinion, he adds, is only 6
percent.
The president, Rouban says, is a liberal in two senses.
Macron isn't just an economic liberal, but also a person who wants a liberal
society, and Rouban argues that this doesn't jibe with France's traditional
political fault lines. If a person is economically liberal in France, he says,
then they belong to the right. But if a person is in favor of an open society
and voted for gay marriage, for a tolerant immigration policy, they see the
economy as, at most, a necessary evil that needs to be kept on the shortest possible
leash by the government. Rouban argues that Macron's philosophy is based on a
false notion that the traditional ways of thinking, the division between left
and right, are outmoded.
"The French don't want any Hartz IV reforms," says
Rouban, referring to the slashing of the German welfare system carried out by
former Chancellor Gerhard Schröder of the center-left Social Democrats.
"We are not as emancipated as the Germans or the Danes. We believe in the
government and in public service."
'Politics ... Has To Be Learned'
He says the French don't like being led by a man who talks
like a business executive and acts like a monarch. Now, the fact that Macron
destroyed the French political landscape without giving enough regard to what
might be lost in the process is coming back to haunt him. The result of that
being that the anger is now being focused on him. There are no intermediaries
and no buffer between Macron and the anger on the streets. Previously, the
established parties could, to a certain degree, contain people's unhappiness
and resentment. They knew how to make promises and to comfort people. Their
lawmakers had local roots and reported about dissatisfaction in the rural
areas. "Politics is a profession, after all, and it has to be learned,"
Rouban says. Now novices are sitting in parliament, most of whom, like Macron
himself, have never held seats in the legislative body before.
Macron has also steamrolled other societal actors with his
authoritarian style of governing and the unions are weaker than ever. As such,
Rouban sees quite a bit of irony in the yellow vest rebellion. "They're
the genies that Emmanuel Macron let out of the bottle himself."
The weariness over the so-called system, which Macron
himself has stoked, is now robbing him of his ability to shape policy -- and of
his credibility. If you force others to choose between all or nothing, you may
end up with nothing yourself.
The Street Always Prevails
That, too, helps explain why the score currently stands at
1:0 for La Rue, the street. And violence has also proven successful. Once
again, as the legend of French politics goes: The street always prevails in the
end.
To find evidence for that maxim, it isn't necessary to go
back as far as Charles de Gaulles being driven from office in 1968-1969. Recent
history suffices. In 1995, it was pension reform. A decade later, it was highly
unpopular contracts for young workers. The Socialist government even withdrew
an environtmental tax in 2014. On that occasion, the mere threat by truck
drivers to block the motorways proved sufficient. And this time, too, Macron's
supposedly new world looks quite a bit like the old one. On Wednesday, France's
prime minister announced that the planned tax increase would likely be scrapped
altogether. "If we do not find good solutions, we will not levy this
tax," said Édouard Philippe. But he remained mum about what a good
solution might look like.
Was it retreat? Or capitulation?
The protests have now been joined by thousands of high
school students, and farmers have also announced they will strike this week.
Yet despite all of the inconveniences the strikes have caused, seven out of 10
French continue to support the yellow vests.
In a normal situation, the opposition would be seeking to
take advantage. But Macron's election destroyed them and they are far away from
getting back on their feet.
Just as dangerous, though, is the fact that even some of
Macron's allies have been drifting across the lines. Among them is the
economist who once help design Macron's policies and who is now calling for the
reintroduction of the wealth tax. Repealing it was one of the president's first
official acts. Some are also suggesting that the EU's three-percent budget
deficit rule be ignored in favor of new borrowing. None of this, however, is
consistent with the platform on which Macron campaigned. And then there's the
old ally whose support made Macron's election victory possible in the first
place. Now he's telling the president: "You can't govern against the
people."
One last question for Monsieur Rouban. If the situation was
so poor for Macron, then why did he win the election?
'An Excellent Poker Player with a Lousy Hand'
Rouban's answer comes quickly. "He only won this
election because there was no alternative." His victory, the political
scientist says, was fragile from the very beginning. "Macron," says
Rouban, "is an excellent poker player, but he has been dealt a terrible
hand."
A few hours after the prefect has placed the list of
yellow-vest demands back in his drawer, a helicopter lands in Le Puy. Emmanuel
Macron has arrived for an unannounced visit. He looks at the destroyed
prefecture and shakes hands with members of the police. The news of his visit
spreads like wildfire in the city and dozens of protesters suddenly converge
and stand in front of his car, which is standing by to take him back to the
helicopter. "Resign Macron!" they shout.
Someone screams: "We are nothing, but neither are
you!" It appears as though Macron briefly shakes his head before climbing
back into his sedan.
Only days later, Macron will meet with 37 political and
business leaders to discuss how the yellow vest protests are affecting the
country. And on Monday, Dec. 10, he plans to address the country in a speech in
which he is expected to announce political initiatives in response to the
protests.
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