How Emmanuel Macron Can Stop the Paris Riots

(Bloomberg Opinion) -- Much like the U.K. after the Brexit vote, or the U.S. after the election of Donald Trump, France is turning its attention to a part of the population largely overlooked since the financial crisis: frustrated working- and lower-middle class people who feel abandoned by politics and globalization.

While France’s amorphous gilets jaunes do have some particularly national characteristics, such as asking the state to bring about change, there are similarities with other countries that have failed to respond to wage stagnation over the past decade — even if France’s generous safety net has limited the damage.

Many protesters are not destitute, but rather sit in an income bracket that leaves them vulnerable to small shifts in the cost of living. The “barely getting by,” as they’re known elsewhere. This demographic earned an average net salary of slightly less than 1,800 euros ($2,056) per month in 2015, according to official statistics.

Families in this group make up about 20 percent of the French population. When economic changes hit their pocket, they suffer more than most. That’s why they took to the streets to express their fury about the rising price of oil and planned fuel tax hikes. Transport costs matter. Between 1999 and 2013, the share of people commuting to work rose to 64 percent, from 58 percent, according to the French statistics agency.

And they’re right to be fearful, as is true across Europe. A paper by the Brookings Institution in March found that while Europe’s middle class had remained stable in terms of population share, the chances of falling out of this group and into poverty had increased. France has a decent record on income inequality when compared with other developed-world countries, but its slowing economy and high tax burden have created their own problems.

President Emmanuel Macron is unlikely to be able to answer every one of their frustrations, especially given that the yellow vests can hardly be called a movement given their disparate aims, and the growing sense that the protests have been captured in part by the far right. But there is room to alleviate the economic burden on the “squeezed middle.” His address to the nation this evening will be critical to bringing an end to the national crisis that’s seen several weekends of rioting and burning cars on the streets of Paris and other cities.

First, he might want to recognize that his structural reforms — while needed — could be accompanied by some form of fiscal stimulus to boost the economy. French growth has slowed this year, which is unfortunate timing when you’re introducing labor market changes that make hiring and firing easier and less costly. 

Second, he might want to be a little more relaxed on deficit targets. The deficit is set to rise next year to the 3-percent threshold imposed on euro zone members, but it should fall after that. There’s room for a little more spending.

Third, and probably the trickiest sell to that angry 20 percent, he needs to show he remains committed to the employment and tax reforms already started. Investors need stability too, and if firms are to hire more and spend more then backtracking will be dissuasive. The banking sector is already rethinking its post-Brexit Parisian expansion plans. 

None of these things will respond to all of the gilets jaunes’ multifarious grievances. That’s an impossible and unreasonable thing to expect. But Macron can’t afford to ignore the economic anxiety of such a large, and increasingly desperate, part of his society.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering finance and markets. He previously worked at Reuters and Forbes.

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