“The president of the republic has decided to replace Article 8 of the law on equal opportunities with measures in favour of the professional insertion of young people in difficulty,” the presidency said in a statement.
The text said Mr Chirac’s decision was “based on a proposal from the prime minister, after hearing the leaders and heads of the parliamentary groups of the parliamentary majority”.
Prime Minister Dominique de Villepin later said the law would be replaced by a series of proposals aimed at disadvantaged young job-seekers.
“The necessary conditions of confidence and calm are not there, either among young people, or companies, to allow the application of the First Job Contract (CPE),” Mr de Villepin said in a brief televised statement.
The announcement followed a high-level meeting between the president and the prime minister and leaders of the ruling Union for a Popular Movement on the fate of the contested First Employment Contract (CPE).
The back down marks an embarrassing failure for Mr de Villepin, who initiated the CPE, saying it would give employers more flexibility when hiring young people.’
But weeks of sometimes violent protests by students and unionists forced him to back away from the controversial proposal.
Unions and student groups are set to meet shortly to decide what further action to take.
Several unions indicated earlier on Monday that they would be satisfied with the measure being replaced.
“If there is a new text in which the CPE does not appear, that will mean it has been withdrawn, that is what counts,” said Francois Chereque, head of the CFDT union.
The CPE would have made it easier to hire and fire workers under the age of 26, and Mr de Villepin had insisted that it would help curb France’s high rate of youth unemployment, which runs at 22 percent.
Union leaders had given the government until the Easter weekend to withdraw the law or face a repeat of recent general strikes.