French President, Jacques Chirac, has scrapped the controversial youth job contract after weeks of violent unrest.
The labour law, proposed by Prime Minister Dominique de Villepin, would have made it easier to hire and fire people under the age of 26.
Speaking at a televised news conference this morning, Mr de Villepin said he regretted that events had shown the contract could not be applied.
Details of a new measure to tackle youth unemployment are expected later today.
The government U-turn over the CPE makes it unlikely France will attempt broader reform of its highly-regulated labour market before next year's presidential elections.
Today's decision may prove especially damaging for the presidential ambitions of Mr Villepin, who was vilified by opponents of the proposed law. Jacques Chirac is not expected to run in the 2007 election.
Both Mr Chirac and Mr Villepin were careful to say that the CPE, which was part of a wider law on equal opportunities, was being 'replaced' rather than repealed.
