French Prime Minister Dominique de Villepin presented a plan on Monday to combat youth unemployment, seen as one of the underlying reasons for riots that swept rundown suburbs across the country late last year.
Villepin, who has made cutting jobless queues his top priority, said a waiver on welfare charges would be introduced for firms that hire young people who have been out of work for more than six months.
Youths who rioted last October and November in the country's worst violence in nearly 40 years frequently cited a lack of job prospects as a reason for their discontent.
France's youth unemployment rate stands at 23 percent, rising to 40 percent for those without qualifications.
"No democracy can accept leaving such a large proportion of its young people to confront such difficulties," Villepin told a news conference.
He said employers would be granted a three-year exemption from social security charges for young people who had been unemployed for over six months, if they gave them a permanent contract before year's end.
The prime minister is locked in an undeclared battle with Interior Minister Nicolas Sarkozy to win nomination as the main conservative candidate for the presidential poll. Showing real results in job creation could boost his chances considerably.
French leaders have ritually called job creation a priority without really reducing high unemployment. Villepin has so far had better results than most, cutting the headline jobless rate from 10.2 percent in May to 9.6 in November.
NEW CONTRACT Many young people spend eight to 11 years in internships, short-term contracts and temporary work before finding a permanent job, Villepin said. To help them find a stable job sooner, he planned to introduce a new employment contract.
The "first job contract" would guarantee young people a state-funded payment of 460 euros ($558.6) per month, for two months, if they lost their job after four months.
This would be in addition to any severance payment.
The measure will apply to those aged under 26 to offer them financial support while they look for work. Many young people in temporary work have no unemployment benefit rights.
France's working population is set to shrink in 2006 as workers from the baby-boomer generation retire and the country needs new workers to replace them, Villepin said.
Le Monde newspaper said in an editorial the shrinking workforce largely accounted for the falling jobless rate.
The Bank of France earlier said its latest business survey pointed to growth of 0.5 percent in the final quarter of 2005, a downward revision from 0.6 percent seen previously.
The conservative government is trying to boost growth and hiring but has limited room for manoeuvre as it is also trying to cut France's public debt.
The leader of French business group MEDEF was sceptical of Villepin's youth jobs plan.
Unemployment among under 25-year-olds in France stood at 21.4 percent last November, above the European Union average of 18.4 percent, figures from EU statistics office Eurostat show. The rate in neighbouring Germany was 15.1 percent.
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