French government suspends fuel-tax hike after yellow vest riots

The French Prime Minister Edouard Philippe announced on Tuesday that a proposed fuel tax hike would be suspended after fierce protests around the country against the government's economic reforms.

Stating the increase would be suspended for six months, he said: "No tax is worth putting the nation's unity in danger,” Philippe said in a televised address.

Philippe also announced planned price increases for electricity and gas were to be suspended.

Hundreds of thousands have taken to the streets in France in recent weeks in increasingly violent protests over fuel taxes and the rising cost of living. The 'gilets jaune' or yellow vest movement - so called because of the high visibility jackets worn by protestors - is unhappy with various economic reforms Macron is trying to introduce, including raising petrol taxes.

The French president has increased petrol tax this year as he seeks to make the tax system more environmentally-focused, and plans to up the tax again in 2019 have angered many, especially those in rural areas who depend heavily on their cars.

President Macron has long defended the higher gasoline taxes, saying they are needed to scrap fossil fuels and have been compensated for by cuts to payroll taxes.

The turnaround comes as Macron’s popularity sank to an all time low, with approval poll ratings of just 23%

Markets showed little reaction to the announcement, the CAC 40 stock index was down about 0.7% late this morning keeping in line with declines in the rest of the European stock markets.

Petrol currently costs about €1.42 euro a litre in Paris, slightly more than diesel.

Benjamin Cauchy, a spokesman for the movement, said: “It’s a first step, but we don’t want crumbs. Demonstrations will continue as we fight for further demands.”

Economists at Berenberg earlier in the week said Macron should hold his nerve over the yellow vest protests, arguing that his policies should bolster France’s long-term economic health and even usher in a “golden decade”.