Anti-government protests convulsing France will slow growth to a near standstill in the final quarter, the central bank says, complicating President Emmanuel Macron's task of finding concessions to placate the "yellow vest" movement.
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The Bank of France on Monday forecast the euro zone's number two economy would eke out growth of only 0.2 per cent in the quarter from the previous three months, down from 0.4 per cent in a previous estimate.
Finance Minister Bruno Le Maire declined to give an estimate for 2018 growth but forecast the nationwide tumult would trim 0.1 per cent of a point off of national output. His deputy projected growth would round out "closer to 1.5 per cent".
The slow-down will be worrisome for Macron, who faces huge pressure on the streets to make further cuts to taxes and social security costs to bolster household spending power, while keeping France's budget deficit below a European Union cap.
The slowdown is a "reality for our businessmen, entrepreneurs, it's the reality for those whose shops were vandalised, looted, in the most violent way," Le Maire told RTL. "And it's a reality too for our foreign investors."
Police used tear gas, water canon and horses to charge protesters hurling projectiles, torching cars and ransacking shops, though they encountered less violence than the previous Saturday, when the capital encountered its worst violence since the 1968 student uprising.
In a sign of the perceived heightened risk of holding French debt, French government bond yields rose on Monday, pushing the French/German 10-year bond spread to its widest since May, at around 46 basis points in early trade.
Macron will meet union leaders and employers' groups on Monday before he addresses the nation in the evening.
The president has drawn criticism for his silence in public over the violence in Paris - opponents accuse him of turning the Elysee Palace into a bunker. Ministers hope his address will placate the yellow vests, whose revolt poses the most formidable challenge to his 18-month administration to date.
The protests were born out of a backlash against the squeeze on the household budgets of hard-pressed middle class and blue-collar workers. But the movement has developed into a broader anti-Macron rebellion.
Mindful of France's deficit and not wanting to flout EU rules, Macron will have limited room to meet the yellow vests demands for a higher minimum wage, lower taxes, cheaper energy, and better retirement provisions.
The government's latest estimates are for a budget deficit of 2.8 percent in 2019, just below the EU's 3 percent cap - a target Macron has cast as critical to meet to cement his reformist credentials.
Le Maire reiterated his desire to accelerate tax cuts but suggested he was not in favour of reinstating a tax on wealth that Macron narrowed when he came into office, and which earned him the tag "president of the rich".
Australian Associated Press
