The French government will abandon a fuel tax hike, which has sparked widespread protests in France, from next year's budget.
The proposal to increase a fuel tax has been heavily protested by the "Yellow Vest" movement for the last three weeks. On Saturday demonstrations turned violent as monuments in Paris were vandalised and police cars set on fire.
Prime Minister Edouard Philippe told lawmakers on Wednesday: "The government is ready for dialogue and is showing it because this tax increase has been dropped from the 2019 budget bill".
It reverses a decision made on Tuesday to postpone the fuel tax rise for six months.
However, the Prime Minister did not make clear if the increased fuel tax would be added to next year's budget at a later date.
The Yellow Vest protesters are also irked by the squeeze on the high cost of living.
OECD data shows that France is the highest taxed country in the developed world.
Government spokesman Benjamin Griveaux said earlier on Wednesday that all tax-related policies should be evaluated routinely and should be changed if they do not work.
Griveaux told RTL radio: “If a measure that we have taken, which is costing the public money, turns out not to be working, if it’s not going well, we’re not stupid - we would change it.”
French President Emmanuel Macron has lost support from the middle-class and blue-collar workers over his policies that favour the wealthy. Lifting part of the impôt de solidarité sur la fortune (ISF, solidarity tax on wealth), was a staple of Macron's election campaign, which led him to be dubbed as "president of the rich".
He has seen a slump in popularity ratings since he was elected n 2017.
Macron will have another challenge to face as by dropping the fuel tax hike from the budget, it could make France's mission to meet its CO2 emissions reduction target, set in the 2015 Paris agreement, much more difficult.