Social Democracy Now

French President Jacques Chirac on Monday scrapped a planned youth job law that provoked weeks of protests, in a climbdown opponents celebrated as an unqualified victory.

The move was a personal blow to Prime Minister Dominique de Villepin, who had championed the First Job Contract (CPE) and seen his popularity slump with the mass opposition and unrest.

In a televised statement, Villepin said he regretted that weeks of strikes and protests showed the CPE could not be applied but gave no details about his own political future, on the line over his handling of the dispute.

"The necessary conditions of confidence and calm are not there, either among young people, or companies, to allow the application of the First Job Contract," Villepin said, adding he would open talks with unions on youth employment.

Students had planned fresh marches for Tuesday and it was unclear if they would call off their strikes and a blockade of many universities and high schools after the announcement.

Villepin championed the CPE contract as a means of reducing youth unemployment and saw his poll ratings plunge as opposition to the measures mounted, damaging his chances of becoming the ruling UMP party's candidate for president in elections in 2007.

"The president of the republic has decided to replace article 8 of the equal opportunities law with measures to help disadvantaged young people find work," an earlier statement from the presidency said.

"CPE IS DEAD"

The new measures include increased financial incentives to employers to hire people under 26 who face the most difficulties in getting access to the labor market, Employment Minister Jean-Louis Borloo said in an interview with Le Monde newspaper.

That would apply to approximately 159,000 young people currently hired under government-subsidized job contracts and the cost to the government would be around 150 million euros ($180 million) in the second half of 2006, Borloo said.

Those measures could be introduced in parliament as early this week, a senior UMP deputy said.

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Chirac and Villepin were careful in their statements to say that the CPE was being "replaced," but others called it dead.

"The players in the crisis have difficulty pronouncing the words repeal. The CPE is dead, the CPE seems to be finished ... and I think they must have the courage finally to say it clearly," Julie Coudry, president of the student confederation, said on LCI television.

Benjamin Vetele, vice president of the UNEF student union, called on students to keep up the pressure.

"This is a first and decisive victory. There is reason to be satisfied ... We call (on students) to maintain the pressure now as we await the new law," he said on French radio.

Dominique Paille, a UMP deputy considered close to Interior Minister Nicolas Sarkozy who had for weeks called for a compromise on the contract, said: "The president of the republic is withdrawing the CPE. It's a measure that corresponds with what the entire population has been waiting for."