France Scraps Labor Law, Outlines New Plan ; after Weeks of Protests, the Government Backed Down Monday, Proposing Subsidized Jobs Instead

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Bowing to public opposition and persistent street demonstrations, the French government Monday withdrew the controversial youth jobs law that Prime Minister Dominique de Villepin had brandished as a bid to liberalize and modernize France's slow-moving labor market.

"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," Mr. Villepin said in a brief speech. He said the now-defunct contract would be replaced by a series of measures to encourage employers to hire unqualified young people.

The retraction - expected to put an end to a crisis that has rocked the country for several weeks, closing schools and universities, snarling transport, and drawing millions of protesters onto the streets - was widely welcomed.

"We are satisfied," said trade-union leader Jacques Voisin. The government's decision "is a very good thing that points in the right direction," he added.

The French employers' union, MEDEF, was equally happy. "We hope ... that this marks the end of a crisis that has dented our country's credibility," the organization said in a statement.

Replacing the new contract, which would have allowed companies to fire young workers without giving a reason during their first two years on the job, will be a string of measures encouraging the creation of government-subsidized jobs for young people with no qualifications.

This approach, which will cost ;300 million euros ($360 million) a year, according to Labor Minister Jean-Louis Borloo, is in line with traditional French attempts to reduce unemployment that have not worked in the past, says Jean-Paul Fitoussi, a prominent economic analyst. …