[Editor's note: This past weekend saw nearly 300,000 people take part in the 'gilets jaunes' (yellow vests) fuel price protests, with over 2,000 sites blockaded across France. The resulting disorder saw one death and 227 injuries on Saturday, according to the French Interior Ministry, with Le Figaro reporting further protests planned for November 24 and potentially beyond. We asked Saxo Bank's Paris-based Head of Macro Strategy Christopher Dembik what is behind the uprising, and what the implications are for the French economy.]
Named for the yellow vests French motorisis are required to carry in the event of breakdown, the "gilets jaunes
" protests are a spontaneous and disorganised movement that does not have very clear demands, but that is very well supported in rural areas. It all started when gasoline prices increased on the back of higher oil prices and green taxation.
In France, taxes represents roughly 60% of the price of gasoline. When consumers buy one litre of gasoline, 60 cents represents the price of oil, with 10 to 20 cents for transport from the refinery to the gas station, around €1 for the domestic consumption tax on energy products, and finally a 20% value-added tax.
The protesters are vocally against the Macron government's green taxes – worth about €55 billion over the course of his presidency – as they directly restrict their purchasing power. In fact, France's consumer stress index now sits at elevated levels for the first time since September 2014, and this mainly comes down to tax hikes imposed last January (a rise in the contribution sociale généralisée
, or social security tax, as well as hikes on tobacco and fuel taxes).
These hikes had a very negative impact on consumption in Q1'18 and if the government does not postpone the green tax hike expected in Q1'19, the same impact could be felt against a more unfavourable backdrop due to slower growth and a higher oil price.