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April 30, 2018

Looming May protests against Macron

In the standoff between the French government and the trade unions the month of May promises to be decisive. Despite some strike fatigue among SNCF unionists, entering into the seventh week of targeted 2-day-a-week strike action, the protest movement might get a new boost. Last week the FO union elected a new leader who is more open to join the hard line of the CGT union. Also this is an intense strike week starting with the traditional protest march on May 1. Pensioners, employees from companies like Carrefour or Ehpad, and students, are expected to bring their grievances to the streets. The two SNCF strike days of SNCF on May 3 and 5 coincide with strikes at Air France. The week ends with Emmanuel Macron's first anniversary as president. Several parties on the left already plan for a big day of social mobilisation against what they denounce as a neoliberal and authoritarian president.

Will the stand-off with the trade unions pay off? Cécile Cornudet writes that the government missed an opportunity to divide the trade unions when they ignored Laurent Berger, a senior trade union leader who had asked for a negotiated settlement. Instead the government chose to confront the trade unions. But Berger also warned that the effectiveness of the reforms cannot be guaranteed without the social actors in the economy. Édouard Philippe will receive the trade unions on May 7. The question is whether the government will continue with its confrontational tactic.

Will there be a convergence in goals amongs the different actors, as some of the trade unions hope for? Nouvel Observateur notes that civil servants are preparing a second day of mobilisation on May 22, after the one last October. The new action was called by all of the trade unions, a rare consensus that has not been seen for ten years.

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April 30, 2018

France has discovered the Laffer curve

The French budget minister Gérald Darmanin confirmed in an interview with Le Parisien that there will be no increase in taxes or charges to finance the abolition of the housing tax. The abolition of the housing tax has been budgeted for only 80% of the households, but not yet for the 20% better-off. To finance this last 20% creates a hole of €8bn-€9bn for the local authorities. The government wants to redirect one or two points of its VAT receipts to local government to compensate. But then what will happen with the state budget? How will the hole be plugged? Darmanin sees no necessity to act now as the economy is growing faster than expected. He even has plans for more tax cuts, of some of the 300 taxes he identified as not very effective. Darmanin wants to cut taxes to generate growth. France has discovered the Laffer curve.

The columnist Etienne Lefebvre from Les Échos warns that this will not be enough, however. Tax cuts are not the only measures that needed to be counter-financed. As of 2020 the state will take over the SNCF debt, which will become relevant for the public deficit. While the pressure for cost cutting increases, concrete plans are still lacking. 

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April 30, 2018

An important resignation in the UK

The resignation over the weekend of Amber Rudd as UK Home Secretary, over an immigration scandal, is potentially important for the future of Brexit. Theresa May has lost her most important ally in the cabinet. Until recently Rudd was always mentioned as a potential successor to May. There are now not many moderates contenders for a leadership race. If there were a leadership challenge, it is possible that May could be replaced by a more eurosceptic politician, like Boris Johnson or Michael Gove.

We have to read Rudd's resignation in the context of another significant development. The Sunday Times carried an important story on Sunday that ministers have warned May that she could face a leadership challenge if she accepts a customs union agreement. They also want her to sack Olly Robbins, her chief Brexit negotiator. The article made a reference to a conversation between May and David Davis, the Brexit secretary, who warned her that she should be listening to her ministers more. This statement was interpreted by Robbins as a request to fire him. Davis also had a showdown with May's chief of staff Gavin Barwell last week. This was after a  report in the same newspaper of a war-gaming scenario in which it was said - by Barwell, we now presume - there would not be any tears shed over a customs union agreement.

The Sunday Times wrote that we are fast approaching the most perilous moment for May's premiership. A critical moment to watch will be the Brexit cabinet meeting on Wednesday when she is set to recommend Robbins' plan for a customs partnership. This would mean that the UK would collect EU tariffs on behalf of the EU. The paper reported a comment by Michael Gove that the plan was "completely bonkers". Davis agrees with Gove on that point. It also quoted an MP as saying that there would be a violent reaction if May presses ahead with Robbins' plan.

We did not take the various Tory rumblings of the past very seriously because the two warring factions in the Tory party perfectly neutralised each other. But this is different. This is not a row between the Tory right and the prime minister, but between May and her most important ministers. And, with the resignation of Rudd, they have become even stronger.

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