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JOHN LICHFIELD

OPINION: An inflation ‘tsunami’ is about to hit France

The rise in the cost of living in France is among the lowest in Europe - but that does not mean that it's not already causing pain to consumers, and much worse is set to come in January, warns John Lichfield.

OPINION: An inflation 'tsunami' is about to hit France
Photo by Christophe SIMON / AFP

There are lies, damned lies and official inflation figures. According to the official index, the cost of living in France has risen by 6.2 percent in the last year. If you limit that to food prices alone, the figure rises to 10 percent.

No more? It depends how you count and what you count.

A typical “supermarket basket” of 38 of the most used household items – fish-fingers, shampoo, crisps – cost 16.5 percent more at the end of September than 12 months earlier (according to a survey by Le Monde) .

Cooking oil, according to a government survey, is 60 percent higher than it was a year ago; frozen fruit is up by 40.6 percent, margarine 23.5 percent and flour by 23.5 percent. Terrible news if your favourite “French” dessert is “un crumble”.

The official inflation figure of 6.2 percent (the highest since 1985) may be misleading but it is not wrong. It is held down by rents, domestic energy prices and clothes, which have not risen as much as food.

The French government has spent €150 billion – 5 percent of GDP – in the last year to keep down the cost of electricity, gas, petrol and diesel. This mostly explains why inflation in France is so much lower than other countries. Prices are rising at 11.1 percent in the UK, 10.9 percent in Germany, 12 percent in Belgium and at an 8.5 percent average across the European Union.

READ ALSO How France is keeping its inflation (relatively) low

However, France faces a double shock or delayed reckoning in the New Year – what one senior government official describes as a “waterfall” and what Michel-Edouard Leclerc, head of the E. Leclerc supermarket chain, calls a “tsunami”.

The state subsidies on petrol, gas and electricity cannot be afforded indefinitely and are being wound down. Petrol and diesel rebates have already been reduced and will vanish from January 1st. Instead there will be targeted subsidies for poorer families and those dependant on cars for work.

The big price-totems outside filling stations and in supermarket car-parks – a better guide to the gloomy provincial mood than opinion polls – are already showing petrol and diesel at over €2 a litre.

The government’s 2022 freeze on gas prices and the 4 percent cap on electricity bills for households and small businesses will also disappear at the end of next month.

From January, energy price rises will be limited to 15 percent – still much lower than in other countries.  Unfortunately for the government, French people do not compare their power bills with those of “other countries”.

Food price inflation began with the post-Covid boom and was worsened by hot, dry summers and the Ukraine war. It has been lower in France than in other places. A government report this month found that – far from price gouging – the French farming, food and retail industries have been cutting profit margins to prevent consumer prices from rising even higher.

Unfortunately for the government, French shoppers do not (except a very few) look at supermarket prices elsewhere. Faced with a €120 shopping bill that once cost less than less €100, they tend not to say: “Thank God, we are not British or Belgian or German”.

This is what the senior official means when he warns that the country is paddling towards a “January waterfall”. The government had hoped that market prices for petrol and diesel would have fallen by now – compensating for the loss or reduction of state subsidies. They have not.

Electricity and gas bills will shoot up by 15 percent in the New Year – just as France faces the prospect of selective power cuts. Repairs to its ailing fleet of nuclear power plants remain behind schedule.

EXPLAINED What your French energy bills will look like in 2023

Leclerc also warned on Monday that a “tsunami” of new food price rises lies ahead. Inflation was being “normalised”, he said – in other words producers were unwilling to cut their margins indefinitely. A spiral of higher costs and higher prices was being built into the system.

“Felt” or everyday inflation is mostly food inflation. The poorer the family or the individual, the bigger the share of income spent on food. The government has also tried to soften the impact of high prices on the poor. Apart from the energy subsidies, it sent a €100 “cheque” to all households on low or modest incomes this Autumn.

Unfortunately for the government, memories are short and supermarket prices are high – €100 does not go very far when the price of flour and fish-fingers is rocketing.

When power bills explode and food price spike this winter who will thank the government for sparing France the worst of inflation in 2022?

An opinion poll this week found that 89 percent of French people were miserable about their immediate future. France, unlike other countries, does not do passive gloom for long.

Troubled waters, whether a  “waterfall” or a “tsunami”, lie ahead. 

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POLITICS

Macron vs the unions: What happens next in France?

French President Emmanuel Macron is facing his biggest standoff with France's trade unions since coming to power in 2017, with the outcome of a series of strikes and protests seen as decisive for both sides.

Macron vs the unions: What happens next in France?

The 45-year-old leader has made raising the retirement age a signature domestic policy of his second term in office — something the unions and millions of protesters are determined to block.

After two days of nationwide strikes and demonstrations, AFP looks at what is likely to happen next on the streets, in parliament, inside the government, and in wider French public opinion.

On the streets

Labour leaders were delighted with their second day of protests on Tuesday, which they claimed had seen around 2.5 million people hit the streets, including in many small and medium-sized towns.

Official estimates put the figure at 1.27 million, compared to 1.1 million people during round one on January 19th, according to the interior ministry.

READ MORE: Calendar: The latest French pension strike dates to remember

Momentum is clearly with the unions who announced two further days of protests and strikes next week, on Tuesday and Saturday.

“The movement is growing and spread across the whole country,” the head of the hard-left CGT union, Philippe Martinez, said on Wednesday.

Nevertheless, unions no longer have the ability to paralyse the country and working-from-home practices mean most white-collar workers can easily adjust to transport stoppages.

The biggest fear of authorities is a repeat of the 2018 so-called “Yellow Vest” protests — a spontaneous movement drawn mostly from the countryside and small-town France that led to shockingly violent clashes with police. 

“The trauma was so big and the violence so great, I don’t see it happening again for the moment,” Bruno Cautres from Sciences Po university in Paris told AFP earlier this month. 

In government 

The government was expecting a rough ride — few major policy changes happen in France without protests, and former president Nicolas Sarkozy faced similar resistance with his pension reform in 2010.

Macron has faced numerous challenges from the unions in the past and has always succeeded in pushing through his pro business agenda and social security reforms.

The only exception was his first attempt at pension reform — also highly contested — which he withdrew in 2020 during the Covid 19 pandemic.

Prime Minister Elisabeth Borne has been the public face of the latest proposals, while Macron has kept his statements and appearances to a minimum, as is his habit.

But with the battle lines hardening and protests growing, the president might be forced to enter the fray. 

“I think the president will speak, but not right now,” a minister told AFP on condition of anonymity. “If he did it now, it would look like we’re panicking.”

In parliament

The draft legislation will be debated for the first time in the 577-seat National Assembly from Monday.

Macron’s allies are the largest group with 170 seats, but they do not hold a majority after a weaker-than-expected showing in June elections.

Support from the 62 rightwing Republicans (LR) party MPs will be essential.

LR has long supported raising the retirement age, but there are doubts over how many of their MPs will give the government their backing.

“I’m not asking the government to give in to the protests. This reform needs to be done,” LR parliamentary party chief Olivier Marleix said on Wednesday.

The lower house debate will finish on February 17th at the latest when a vote can be called — or the government could transfer it to the Senate or ram it through with controversial executive powers that dispense with the need for a ballot.

The bill is expected to pass the conservative-dominated Senate, where a vote is to take place by mid-March.

Public opinion

The latest polling figures show a growing majority opposes the reform and supports the protests, with roughly two in three people against the proposals.

Ministers have struggled to find winning arguments, at times arguing the changes are needed to reduce government spending, at others insisting they will make the pension system fairer.

“The government has not won with the argument that it is necessary,” Bernard Sananes, the head of the Elabe polling group, told AFP. “And it is fighting on another, more intense front which is that the reform is seen as unfair.”

In private, Macron’s allies insist their best hope is for parliament to quickly approve the legislation that will never be popular but might grudgingly be accepted as necessary.

“The question is how big the protest movement will be and how long it will last,” the minister told AFP.

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