French deal targets jobless youths

The French government is to subsidise 100,000 new jobs for young people next year in the hope of reducing unemployment.

France's unemployment rate is 10%, but 22.8% for those under 25. French employers are especially reluctant to hire young people because restrictive labour laws make it very hard for companies to lay off new employees.

Under the plan, unveiled at a cabinet meeting, companies that hire people between 16 and 25 for at least a year will only have to pay 25% of their salary.

The government estimates that the plan will cost 2.3 billion euros (£1.8 billion) in 2013. It plans to add another 50,000 contracts in 2014.

"We are waging a battle for jobs," president Francois Hollande said. "It's the No. 1 challenge of our mandate."

The government will give preference to young people hired from poor urban or rural areas that have been hit hardest by rising unemployment. Certain sectors will also be favoured, such as medicine and digital or green technology.

The proposal needs to make its way through parliament, but Mr Hollande's Socialist Party has a solid majority there and the issue was a major campaign promise. He has staked his credibility on driving down unemployment and encouraging growth, all while meeting strict budget deficit targets.

An entrepreneur's association immediately criticised the idea.

"The jobs for the future are only a Band-Aid, if a necessary Band-Aid, in the face of a government that every day shows itself more incapable of overcoming the difficulties our country is confronted with," said Guillaume Cairou, president of the Club of Entrepreneurs. "How can they not see that this cost is extremely high for the government, even while we should be reducing our deficit?"

While France has so far dodged investor concerns that have driven borrowing costs high in Spain and Italy, many economists say its day is coming. While the sheer size of its economy - the eurozone's second-largest - has insulated it, they insist that its declining competitiveness will eventually force it to make the kinds of tough reforms its neighbours are facing.