Jacques Chirac's long-awaited speech on Friday seemed aimed at striking a balance between Dominique de Villepin, the prime minister, who wanted the law applied promptly and in full, and millions of protesters who demand that it be scrapped before any compromise could be discussed.

Even before he spoke, students gathered in Paris and other main cities to continue their protests against the First Job Contract (CPE), which will let employers fire workers under 26 without cause during their first two years on the job.

"It is time to defuse the situation," Chirac said in the televised speech, in which he said he understood the concerns of youths who could not find jobs. Youth unemployment is running at 22%, well above France's 9.6% national average.

Chirac said he had heard "the worries that many youths and their parents express".

"In our republic, when the national interest is at stake, there should be neither winners nor losers. We should now close ranks," he said.

Contracts on hold

In a gesture to students, Chirac said no CPE contract could be signed until the new changes had been voted.

Villepin pushed the law through parliament last month, arguing France must reform its rigid labour code quickly to fight youth unemployment. Students and workers reacted with the biggest protests seen here in years.

Youth protests against the new
law have paralysed Paris life

Chirac's proposals reflected suggestions made by Nicolas Sarkozy, the interior minister and leader of the governing UMP party and the main rival to Villepin in the undeclared race to become the conservative candidate in the 2007 presidential election.

Opposition Socialist Party leader Francois Hollande said Chirac had failed to calm the atmosphere and there was now "much to fear ... . I think he made things more complicated where he should have made them more simple."

"There will be more demonstrations," he said.

Students staged an initial protest during the day at the Bastille monument, a favourite starting point for French protests in Paris, and called for a further demonstration late on Friday at the same place.

Dominique Barbet, senior economist at BNP Paribas, said: "The law has been largely emptied of content but the trade unions, students, and opposition just refuse the law altogether so the protests are likely to continue."