December 12, 2018 / 5:23 PM / in 7 months

Macron to plead deficit slippage essential for reforms plan

PARIS (Reuters) - French President Emmanuel Macron will plead to euro zone peers this week that the costly emergency measures he announced to quell anti-tax protests were needed to ensure he could press on with his ambitious reform agenda, an official said on Wednesday.

French President Emmanuel Macron speaks during a special address to the nation, his first public comments after four weeks of nationwide 'yellow vest' (gilet jaune) protests, at the Elysee Palace, in Paris, France December 10, 2018. Picture taken December 10, 2018. Ludovic Marin/Pool via REUTERS

France is on course to overshoot the European Union’s budget deficit ceiling next year after Macron caved in to a near month-long public revolt and unveiled 10 billion euros ($11.4 billion) worth of tax cuts and spending increases.

“The president’s European message will be very clear,” a source close to Macron said ahead of an EU summit set for Thursday and Friday. “To be able to reform, you can’t have blockages or incomprehension in society, and we need to overcome this anger and impatience.”

The “yellow vest” protests erupted out of nowhere on Nov. 17, when nearly 300,000 demonstrators nationwide took to the streets to denounce high living costs and a fuel tax.

Roadblocks around the country and violent clashes in central Paris have already taken their toll on the economy.

In his response on Monday, Macron insisted that the subsidies for the poorest workers and tax cuts for pensioners were not a U-turn but an acceleration of his pledge to “make work pay”.

He also said he would push ahead with planned reforms of the pension system and unemployment benefits next year. Some analysts have expressed doubts that could now happen after the sharp loss in public support he suffered.

“The reform agenda is not jeopardized, it would have been stalled had French society been durably blocked,” the source close to Macron said.

“None of the major economic reforms that had been well received by our partners have been called into question,” the official said, citing reforms of the labor market and railways introduced last year.

After his election in 2017, Macron made reducing the French deficit below the EU limit of 3 percent the cornerstone of his push to reform the euro zone, arguing that fiscal credibility would help convince Germany to back his plans.

Asked about the reaction in the German press — which said Macron had lost credibility as one newspaper mocked him as ‘France’s Gulliver’ — the official said he expected to have some explaining to do but that Berlin politicians would be more understanding.

“Yes, some off-the-cuff comments are a bit rough, but we have to take that into account, because they reflect a concern,” the official said.

“The German political system will look into this more thoroughly than a few columns done in the heat of the moment.”

Reporting by Michel Rose; additional reporting by Joseph Nasr in Berlin; Editing by Richard Balmforth

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