Union leaders backed the package to save jobs  following their meeting with Sarkozy on Wednesday[Reuters]

French President Nicolas Sarkozy has promised to spend more than $500m on saving French jobs, as he tries to curb spiralling unemployment and an economic downturn from ruining his chances of re-election.

With France on the brink of recession and stripped of its triple-A credit rating, Sarkozy on Wednesday met trade union leaders for talks aimed at producing a series of measures which he can unveil before the presidential election in April and May.

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After four hours of negotiations, Sarkozy said the state would increase its contributions for job training and an  unemployment scheme designed to help companies keep workers employed during a downturn.

Leaders of France's biggest unions said they backed the "emergency measures" but would resist any attempt to make deeper changes to the labour system so close to an election.

The $550m sum would not add to France's deficit as it would be covered by contingency funds in the 2012 budget, and it could be doubled if France tapped a European fund for job training, Sarkozy said.

"The situation on the employment front is extremely worrying, which compels us to take strong and speedy decisions," he said. "We need to do everything we can to avoid severing the link between workers and their employers."

Sarkozy, who said he would wait until the end of January to unveil deeper reforms, added that France would set up public investment banks for industry with the aim of making French firms more competitive.

Pressure mounting

His proposed reforms also include a scheme to reduce social fees on hiring workers and make up the shortfall by raising value-added tax.

"Where we disagree is on the aspect of saying that labour costs are the real cause of unemployment," Bernard Thibault, head of the CGT union, said. "We are in fundamental disagreement on this point."

Pressure on Sarkozy to deliver reforms intensified after the Standard & Poor's agency identified "labour market rigidities" as one reason for its lowering of France's credit rating to AA+ last week.

The conservative president faces gathering economic gloom, with French jobless figures at a 12-year high, less than 100 days before an election which polls show Sarkozy losing to Socialist candidate Francois Hollande.

Critics said Sarkozy has a habit of hurrying into reforms and then watering them down to avoid conflict with unions.

"This is the classic scenario where he rushes into a deal at the last minute without taking enough time for consultation or following through,"Pierre Cahuc, professor of economy at France's elite Polytechnique school, said.

"I'm extremely pessimistic about the chances of either the unions or the government pushing the job market in the direction of a real reform," he added.

Source: Agencies