The ‘yellow vests’ undermined Macron in France and the EU

Paris was a blockaded city this weekend. The government was forced to close down all the main tourist sites in the French capital. The Eiffel Tower, the Opera of Paris, the Louvre museum and tens of other sites which may attract the fury of the ‘yellow vest’ movement are closed and heavily guarded. Galerie Lafayette and Printemps, the two landmark department stores in the center, were closed on Saturday. Yet, protesters took their cause to the periphery of the capital, where police confronted them with violence and booked around 500 of them. The ‘yellow vests’ As reported by major news agencies, the ‘yellow vest’ movement has developed as a spontaneous uprising against the high cost of living and a planned new tax on fuel. It took its name from the yellow traffic jacket all French motorists are obliged to keep in their cars. No political parties, trade unions or other civil society entities have supported it and it is organized through the internet. It has acquired nationwide dimensions and is supported by around 85% of the public opinion. The Emmanuel Macron administration is already backing down and has even offered some tax sweeteners to soothe public anger. A spontaneous uprising Spontaneous uprisings are not unknown to the French people. The French Revolution of 1789 started with the fall of Bastille on 14 July, after a spontaneous attack by the Paris ‘sans culottes’. After that, many more uprisings cropped up spontaneously, always targeting the incumbent government. The last and most important one was the historical revolt of students of May 1968. To be noted, the French national anthem urges the citizens to revolt, it goes like that, “Aux armes, citoyens, formez vos bataillons”, “To arms, citizens, form your battalions”. In any case, whatever the future may hold for the ‘yellow vest’ movement, the truth is that its culmination during the past week seriously undermined Emmanuel Macron’s authority within and without France. It’s not only that his public approval fell to around 20%. This week the 27+1 European leaders are to hold their end year Summit this Thursday and Friday, 13-14 December. For one thing, it will typically endorse the British PM Theresa May’s proposal for the Brexit withdrawal agreement, very probably in vain. The British Parliament is not bound to endorse it. However, the EU Summit is expected to take landmark decisions about the future of the European Union. Undermining Macron Macron wants those decisions to be pivotal for the deep reform and the strengthening of the Union’s cohesiveness. He says the EU has either to become a solid union or it will soon start to unravel. The most important of the reforms Paris wants is a real economic administration in the euro area, with a real Minister of Finance endowed with a budget macro-economically significant. It’s supposed to function as an income redistribution mechanism between the wealthy North and the poorer South. Just about what the national budgets do. By the same token, Macron wants a common Eurozone mechanism for an effective common bank deposits guarantee. Of course, all that is an ‘anathema’ for the Germans. Chancellor Angela Merkel, despite being the most open to such a discussion German prime rate politician, cannot support the core of Macron’s vision for Europe. Most of Germans think that France and the ‘lazy Southerners’ want Germany to pay for the South’s government deficits and the dad loans of their flawed banks. An 18 hours ministers’ fight Last week, the ministers of Finance of the European Union undertook the task of preparing these reforms for a more cohesive future for club. It took them 18 hours to come up with a clumsy compromise. Again, the Germans, aided or even pressed hard by other Northerners, managed to water down what the French wanted, up to the point of no recognition. Although the Dutch were finally convinced to discuss the French reforms, the outcome was very poor. The Paris proposals have been confronted for months by the so called ‘northern alliance’ including Holland. This latter country appears even harder than Germany. Up to now, the Dutch denied even discussing Macron’s vision for the EU. Let’s dig a bit in the details. During last week’s gathering of the EU ministers of Finance there was some progress towards what the Southerners want. The Council of Finance Ministers accepted to create a special budget for Eurozone. There are two proposals in this direction: the first was brought forward by the European Commission and the second, more advanced option, by France and Germany. It’s not yet known what will be the dowry of this new Eurozone budget, aimed at backing member states in distress. It’s not known, either, what is to be financed from this budget. Who is to pay? Again, there are two options for that. In the first case, it will be the coffers of the member states to endow the new Eurozone financial tool. The second option is a new tax on financial transactions, as Paris and Berlin propose. In any case though, countries with acute fiscal problems like Greece will be favored. However, the size of endowment of this new Eurozone budget is not just a matter of quantity. Its volume will have a strong qualitative side. If it could bail out entire countries, the EU would evolve into a strong, coherent, solid and close union. The new financial tool could then be able to issue even Eurobonds, thus mutualising large parts of Eurozone risks. But no, nothing of the sort is in sight. Much talk few results So, after that 18 hours meeting there was a timid step towards a more cohesive EU, but there was no progress in the other key issue; the pan-European bank deposit guarantee. In this front, there was just the typical consensus about ‘strengthening the European Stability Mechanism to bail out failing banks in cases of a crisis’. However, there wasn’t even the slightest reference about how this could be achieved. Reportedly, the 18 hours session of the ministers of Finance was consumed not on the details of the reforms, but by exchanges between the French and the Dutch ministers, both having repeatedly threatened to walk away. So, the compromises reached at the ministers of Finance Council will obviously be what the 27 leaders are expected to decide at the end of this week. As usual, the leaders’ Summit just rubber stamps settlements achieved at the ministerial councils. In any case, the French plus the South side comes out more or less empty handed. There is nothing concrete about the new Eurozone budget, let alone about a super – minister of Finance for the entire euro area, as Macron wants it. No real banking union By the same token, the banking problems remain a question for each and every member state separately, and there will be no common action to save banks in distress. Not in the foreseeable future, at least. In reality, there was no need to sit in that ministerial council for 18 hours to decide almost nothing, about the very real problems of the EU. As a result, the EU remains a union just in name. So, in case of a new banking or government debt crisis, the surplus member states can -optionally- intervene to bail out the ailing part. Obviously, it will be on the condition of a total surrender of the self-governance ability of the ailing country. Exactly as it was the case in the Greek, Irish, Portuguese, Cypriot and Spanish crisis. The intervening rich member states, of course, will do that by charging the ailing member state with what they see ‘right’ for their ‘help’. In short, Macron was not able to bring about the era of changing reforms he wants for the EU, and this time the ‘yellow vests’ contributed to that.