Climbdown: Under-pressure Macron says he won't put Europe ahead of French anger
THE BIG PICTURE
French President Emmanuel Macron said yesterday he would never put Europe ahead of the demands of the French people, days after he caved in to a anti-tax revolt by announcing costly measures set to increase the French budget deficit.
"No country can move forward if it doesn't listen to the legitimate anger of its people, an anger which is expressed everywhere in Europe," President Macron told reporters ahead of an European Union summit in Brussels.
"I will never carry out the European project, in which I believe, against aspirations I consider as legitimate. I think they can be reconciled and that's what we're trying to do," he added.
The tax breaks and other measures he is offering to appease the so-called yellow vest' protesters are likely to push France's budget deficit above the European Commission threshold of 3pc of GDP. Earlier in the week President Macron announced wage increases for the poorest workers and a tax cut for most pensioners on Monday in an effort to quell a near month-long public revolt.
But the measures will leave a €10bn hole in the Treasury's finances, and deals a blow to Mr Macron's reformist credentials.
"We are preparing a fiscal boost for workers by accelerating tax cuts so that work pays," Prime Minister Edouard Philippe told parliament. "That inevitably has consequences on the deficit."
Mr Philippe did not give details on the impact of the concessions on public finances or possible spending cuts, saying only that the government aimed to keep spending from increasing.
"Under all likelihood, the 2019 public deficit will print above the 3pc benchmark," Societe Generale economist Michel Martinez wrote in a research note.
Any failure to respect the EU deficit ceiling could shatter France's fiscal credibility with its European partners after Paris flouted it for a decade before Mr Macron took office.
And any sign of leniency from Brussels could complicate the European Commission's tense discussions with Italy about keeping its deficit down.
Italian Deputy Prime Minister Luigi Di Maio said Paris should be subject to the same treatment as Rome and now risked EU censure over its budget concessions.
"If the deficit/GDP rules are valid for Italy, then I expect them to be valid for Macron," Mr Di Maio said.
Moreover, the yellow-vest protests are slowing economic growth. Two opinion polls on Tuesday showed roughly one in two French people think they should now end their protests.
The European Commission is to make a final assessment of France's 2019 budget in the second quarter of next year when it releases new economic forecasts, a spokesman said.