The French government is reeling after being forced by popular protests to scrap the controversial youth jobs contract.
The demonstrators got their way in the end
The law, designed to make it easier for employers to hire and fire staff aged under 26, will now be replaced by measures targeted specifically at the most disadvantaged young people, President Jacques Chirac says.
Q. How much political damage has the government sustained?
The two politicians associated with the law, President Chirac and his personal protege Prime Minister Dominique de Villepin, have seen their ratings drop sharply.
Mr de Villepin, an unelected politician, was Mr Chirac's preferred choice to run in the 2007 presidential elections for the Right. Most analysts believe he now has little chance of success.
Q: Who does that benefit?
Mr de Villepin's big rival, the ruling UMP leader and interior minister Nicolas Sarkozy.
More than 50% of the French public believe he has emerged stronger from the crisis.
He is a strong believer in economic reform, but implicitly criticised Mr de Villepin's proposals. "The French accept change," he said, "but always want to be assured
that it is fair. They found these proposals unfair."
The weeks of protests and the government's discomfiture have also emboldened and united the fractious left-wing opposition.
And industry leaders are predictably unimpressed.
Laurence Parisot, head of the largest business association Medef, warned unions against crowing about their victory.
"With victories like that, we will soon all be losers," she said.
Q: What was in the controversial law?
The law creating the First Employment Contract (Contrat Premiere Embauche or CPE) was passed by parliament as part of a broader bill on equal opportunities.
It became law on 2 April, but as the protests escalated President Chirac asked employers not to apply it immediately.
The CPE was a new work contract for under-26s with a two-year trial period. In that period, employers can terminate the contract without having to offer an explanation.
The CPE says that after the first month employers have to give two weeks' notice for severance of contract, and after six months the notice period is extended to one month.
For other employees, the trial period is usually only one to three months.
After the two-year trial period for under-26s, the CPE was to revert to a standard full-time contract.
As the protests picked up, President Chirac made concessions intended to ease its introduction, reducing the trial period to one year and obliging employers to state their reason for any dismissal.
Q: What is the argument for the employment reforms?
President Chirac and Mr de Villepin said it was a way to get more people into work, as France had a high unemployment rate and a stagnant labour market.
France has one of Europe's highest youth unemployment rates. More than 20% of its 18 to 25-year-olds are unemployed - double the national average of 9.6%.
The government argued the CPE would boost opportunities for young workers, many of whom can only find short-term contract work at best.
Some employers say they are reluctant to take on new staff because of the difficulties of firing them if they prove unsuitable or are no longer needed.
Q. And the counter-arguments?
Critics warned the new legislation could make it even harder for young people to find a permanent job, and it could be misused by larger employers.
They argued that the CPE would undermine job protection and accused Mr de Villepin of having pushed the law through without consulting trade unions or holding a proper debate in parliament.
Trade unionists and student leaders said the measures were blatantly unfair and called for measures to stimulate job creation instead. They said they would not negotiate unless the CPE was scrapped.
Q. What is the government planning to do now?
It says it will replace the CPE with new state subsidies to encourage companies to take on unqualified
The new bill expands on several measures already in
place, increasing the state's role in the workplace
instead of decreasing it, as the government wanted.
It is estimated that about 160,000
young people would be touched by the measures this year, at a
cost of some 150m euros (£104m; $180m) to the state.
Q. Is this the end of the protests?
Not necessarily. Some students and union leaders have decided to seek the repeal of the entire law on equal opportunities, as well as a
similar New Employment Contract (CNE) introduced last year for
employees of small companies.