French government holds firm on job law

PARIS, Mar 20 (Reuters) French President Jacques Chirac today backed his prime minister in a confrontation over a youth job law, urging unions and students to enter constructive talks on the measure rather than threaten strikes.

Buoyed by protests at the weekend that organisers said brought 1.5 million people on to the streets nationwide, union leaders set a today evening deadline for the government to withdraw or suspend the so-called First Job Contract (CPE) law.

Prime Minister Dominique de Villepin has shown no signs of backing down over the law, which allows employers to fire people under 26 for any reason during a two-year trial period.

Chirac said the CPE showed the government's willingness to fight youth unemployment, which stands at 23 per cent in France, more than twice the national rate.

''The challenge ... is to open a constructive and confident dialogue in this spirit which can allow improving the CPE,'' Chirac told a news conference with Jordan's King Abdullah.

''I know this is the prime minister's and the government's willingness and I can only approve of it,'' Chirac said.

Villepin, whose popularity has slumped in recent weeks, chaired a meeting with company bosses and ministers earlier to discuss the importance of creating jobs for young people and later met students.

''I have come to listen to them and hear their concerns and discuss the different propositions that could be made for improving the First Job Contract Law,'' Villepin told reporters before the meeting.

Student groups and union leaders say the CPE would create a generation of disposable workers without job security and union leaders were due to meet late on Monday to decide on their next move, with Thursday cited as a possible strike date.

Business leaders who met Villepin said he stood firm on the law but was seeking discussions.

''He is in a spirit of dialogue, not in a spirit of moving back,'' Bruno van Ryb, head of Middlenext, a company which employs 400 people, said of Villepin after the meeting.

ULTIMATUMS Large rallies can make or break governments in France. Protests in 1995 badly undermined the then conservative Prime Minister Alain Juppe, who lost snap elections two years later.

Critics within his own ruling UMP party have dubbed the CPE Comment Perdre une Election -- How To Lose an Election.

More student rallies are planned for tomorrow and commentators say the unrest could hurt Villepin's ambitions of contesting the presidency in 2007 and harm Interior Minister Nicolas Sarkozy or any other possible right-wing candidate.

Lasting protests could also dent, if only briefly, French consumer confidence as did riots in poor suburbs last autumn.

European Central Bank President Jean-Claude Trichet said on Monday the protests were not yet having a major economic impact.

''At the moment, I don't see significant economic effects, certainly not on the level of the euro zone's 313 million inhabitants,'' Trichet told LCI television, adding European countries needed structural reforms to battle mass unemployment.

A BVA opinion poll piled fresh pressure on the government, showing 60 percent of French voters want the law withdrawn.

Another poll, published in Liberation newspaper, showed 38 per cent want the law modified while 35 percent want it withdrawn.

Government spokesman Jean-Francois Cope said that poll showed the importance of further discussion.

Reuters SY DB2257