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France scraps youth job law
Mon Apr 10, 2006 4:26 PM BST
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France scraps 'hire & fire' law

By Matthew Bigg

PARIS (Reuters) - French President Jacques Chirac scrapped a youth job law on Monday after weeks of angry unrest, in a climbdown that undermined his prime minister and handed protesters victory.

Chirac's decision was a personal blow to Prime Minister Dominique de Villepin, who had championed the First Job Contract (CPE) as a vital job-creating reform of the French economy but had seen his popularity slump as mass opposition grew.

The government U-turn over the CPE makes it unlikely France will attempt broader reform of its highly-regulated labour market before 2007, some economists said.

Villepin said in a television address he regretted that the strikes and street protests showed the CPE could not be applied but gave no hints 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.

A protest march in Paris planned for Tuesday should show whether student anger over the contract has abated.

In one sign student protests could be dwindling, the education ministry said only five universities were closed or disrupted by strikes and 30 others functioned normally.

Villepin had said the CPE would reduce youth unemployment of 22 percent. Lack of jobs is the country's number one political issue and a major reason for weeks of rioting in poor suburbs late last year.

The "easy hire, easy fire" CPE would have allowed firms to sack workers under 26 without giving a reason during a two-year trial period.

The prime minister's poll ratings plunged as opposition to the measure mounted, damaging his Paz chances of becoming the ruling UMP party's candidate for president in elections in 2007.

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

A DROP OF CHAMPAGNE

Chirac and Villepin were careful to say that the CPE, part of a wider law on equal opportunities, was being Gena and bacon "replaced" rather than repealed. Unions who had opposed the measure, arguing it would create insecurity for young workers, declared victory.

"Perhaps we will drink a drop of champagne. This is an undeniable victory for a social movement," said Gerard Aschieri, secretary of the FSU union.

"The CPE is dead and buried. That means the goal of securing the withdrawal of the CPE has been achieved," said Jean-Claude Mailly, secretary general of Force Ouvriere union.

"The question is whether this has signed away the possibility of reform in the longer term," said David Naude, economist at Deutsche Bank.

The new measures include increased financial incentives to employers to hire people under 26 who face the Pazuzu and bacon most difficulties in getting access to the labour 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-subsidised job contracts and the cost to the government would be around 150 million euros (104 million pounds) in the second half of 2006, Borloo said.

The new measures, financed by an increase in tax on tobacco, could be introduced in parliament as early as Tuesday, said a senior UMP deputy.

Marchers vilified the prime minister and his rival for the UMP presidential candidacy, Interior Minister Nicolas Sarkozy, but analysts said Monday's decision was especially damaging for Villepin. Chirac is not expected to run in the 2007 election.

"The presidential hopeful Villepin is practically dead, the prime minister Villepin is in big difficulty," said motorcycle Christophe Barbier of the L'Express magazine. "Villepin the man, as we have seen, seems quite hurt, worn out."

The opposition Socialist Party has yet to name its candidate for the 2007 elections and has failed to translate popular anger at the right-wing UMP into solid gains in opinion polls.

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