France's socialist government is to spend €2.3-billion next year to combat youth unemployment, despite its need to find more than €30-billion in savings to meet its European commitments to reduce its budget deficit.
The plan to create 100,000 jobs in 2013 was revealed as Jean-Marc Ayrault, prime minister, made an unprecedented appearance at the annual conference of Medef, France's employers' federation, as he sought to reassure business leaders concerned by his government's tax and industrial policies.
With economic growth stalled for the past nine months and only a weak recovery forecast over the next year, the extra spending will add to the already hefty burden facing the government in meeting its pledge to reduce the budget deficit to 3 per cent of gross domestic product next year.
Mr. Ayrault offered no indication that he would shift the planned balance of savings away from tax increases, as demanded by Medef. But he said the government was committed to addressing France's declining industrial competitiveness, signalling that it would respond to industry calls for action to reduce the high cost of labour in France, although he gave no details.
"To carry weight in Europe and the world, France must become again sustainably competitive. It means businesses must be strong and able to create jobs," he said.
Laurence Parisot, the head of Medef, said she was encouraged by Mr. Ayrault's appearance, but said the issue was putting reforms into action.
The severe economic challenges facing François Hollande, president, were underlined when the leader of the country's biggest trade union called for demonstrations in cities across France in October "in defence of industrial employment."
Bernard Thibault, leader of the CGT union, said the government must choose between union demands for more employee protection and the demands of Medef for more labour market flexibility.
"The government must decide. It is out of the question for us to countenance that workers must accept more flexibility," he said.
With unemployment growing rapidly and set to exceed 10 per cent of the work force, the government moved on Wednesday to fulfil one of Mr. Hollande's main election promises by agreeing to a program for "employment of the future" that will see the state finance 75 per cent of the cost of 100,000 new jobs next year and 50,000 in 2014.
The jobs will be for those aged between 16-25 with low qualifications, concentrated in areas of high social deprivation and low employment.
It was the second spending measure announced in two days after the government's commitment on Tuesday to spend €300-million in financing its share of a €0.06 per litre cut in fuel pump prices. The cost is to be shared equally with the fuel industry.
Despite growing concern among independent economists about the government's ability to hit the deficit target, Mr. Ayrault reiterated in his speech to thousands of Medef members gathered outside Paris that it would do so based on an equal split between tax increases and spending cuts. The savings required are expected to be at least €33-billion, an unprecedented figure for France.