By Caroline Wyatt
BBC News, Paris
The proposed reforms caused widespread anger across France
Trade unions and protesters in France are claiming victory after the French government performed a complete U-turn on its controversial youth jobs law.
On Monday, the French government said it would withdraw the law, which would have allowed employers to sack anyone under the age of 26 within the first two years of their employment.
The measure had provoked weeks of protests, until finally, Prime Minister Dominique de Villepin conceded defeat and said he would find other ways of reducing the numbers of young jobless.
This was a humiliating climbdown for Mr de Villepin, who had staked his political reputation on pushing through what initially seemed like a minor reform to a wider law on equal job opportunities for the disadvantaged.
The youth jobs law, the CPE, was aimed at helping youngsters in the troubled suburbs find jobs, after anger over high unemployment exploded into rioting last November.
Yet these reforms unleashed almost equally vociferous anger across France, from mainly middle-class students who feared their future job security - and the jobs for life many of their parents had enjoyed - was being fatally undermined by the French government.
Some protesters want the entire law to be revoked
Over the past months, the French trade unions called out millions onto the streets in support of the students, with the demonstrations culminating in what the unions claimed were three million people marching in protest last week, though the police put the figure at half that number.
On this issue, the unions found a new voice, ultimately forcing President Jacques Chirac to back down - and Mr de Villepin with him.
On Monday, Mr de Villepin did his best to paint this climbdown as the actions of a government and a prime minister listening to the French people.
"I wanted to act fast on joblessness, because the dramatic situation and the despair of many young people made it vital," he said.
"Initially, I wanted to put forward a strong solution. Not everyone understood that, and I regret it. The dialogue is now open and we should not close it again. This crisis reveals a deep anxiety in France, as much as a desire for modernisation."
Yet student leaders Victor Vidilles and Nabila Ramdani say Mr de Villepin's withdrawal of the law was only a first step, with more student protests planned for Tuesday to keep up the pressure on the French government as it formulates a new proposal this week.
"It's not enough because there is still a high unemployment rate in France," said Mr Vidilles.
"We have to be extremely vigilant, and make sure that the government helps everyone - not just students - overcome the serious problem of unemployment here."
Mr de Villepin has seen his popularity fall during the crisis
Ms Ramdani was more optimistic, though still guarded.
"This is the first battle we have won, but not the whole war," she tells me outside Place de la Sorbonne, which is still fenced off by French police guarding the square against further student sit-ins.
"We want to know exactly what proposals will be put forward by the government - and now that a real dialogue is possible, to discuss exactly what future the government can offer to young people."
The French prime minister's own future, however, is now in some doubt.
Dominique de Villepin had wanted to show that he was a strong leader, who could push through reform in order to be seen as a serious presidential candidate for the right next year.
With this U-turn, almost all hope of that has now disappeared - along with any belief that Mr Chirac might use the final year of his presidency to try to reform the French economy and to liberalise France's labour market, as many on the right in France believe is necessary.