"If consumers don't spend, it's because they are fearful for their jobs," he said.

In an effort to convince companies to remain in France and not relocate to cheaper labour markets, Sarkozy promised to end the business tax known as the "taxe professionnelle" next year at a cost of $10.25bn, "to keep factories in France".

But he said local authorities would need to have the shortfall made up, suggesting that other taxes, such as a carbon tax, could help cover the gap and promising not to let France's mounting public debt get out of control.

Protests

Sarzkozy's pledges came after riot police fired tear gas at a handful of student protesters on Thursday.

The students had tried to force their way into the University of Strasbourg in eastern France and threw eggs and shoes at the facade of the new complex.

Student protests over layoffs and reforms in higher education disrupted several other French universities, although most were peaceful.

Opinion polls released on Thursday indicated that confidence in Sarkozy was falling amid frustration over job cuts and concerns that money used to bail out the financial sector was lining executive pockets.